The Price of Winning the Trade War
Mr. Trump hailed the pact with characteristic modesty as 'perhaps the largest Deal ever made.' Details remain sparse, but the core appears to be a Japanese commitment to invest $550 billion in the U.S. while reducing barriers to imports of American agricultural products such as rice. In exchange, Mr. Trump will reduce his 'reciprocal' tariffs on Japan to 15% from 25%—including, apparently, on autos.
The new tariff rate is good news only as relief from 25%. This is still a 15% tax increase on imports from Japan. And don't believe the White House spin that Japanese exporters will pay this tax. They might absorb some of it, depending on the product and the competition. But American businesses and consumers will pay more too and thus be either less competitive or have a lower standard of living.
That $550 billion in new Japanese investment also sounds better than it may be once we know the details. Japanese Prime Minister Shigeru Ishiba suggested Tokyo will offer government loans and guarantees to support these 'investments,' with the aim 'to build resilient supply chains in key sectors.'
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