The BGA Japan team, led by Managing Director Kiyoaki Aburaki, wrote an update to clients on the trade negotiations between Japan and the United States.

Context

  • The government of Japan since April has been actively engaged in tariff negotiations with the United States. The third round of ministerial-level talks was held in Washington, D.C., on May 23, with a fourth round anticipated by the end of the month. A summit between Prime Minister Shigeru Ishiba and President Donald Trump is scheduled to take place on the sidelines of the Group of Seven (G-7) Summit in Canada in June, where both sides hope to reach a meaningful agreement.
  • Separately, the United States has imposed a 25 percent tariff on steel imports since March under Section 232 of the Trade Expansion Act, citing national security concerns. Trump announced via social media May 23 that Nippon Steel will invest $14 billion in a partnership with U.S. Steel. While the specific terms were not disclosed, Trump reversed his earlier opposition to a Nippon Steel merger with U.S. Steel, reflecting a reassessment about the strategic value of U.S.-Japan cooperation in the steel industry.

Significance

  • In Japan, there is support for a constructive agreement that reinforces the bilateral relationship and enhances stability in the global trade environment. However, a rushed agreement with disadvantageous terms for Japan could trigger a political backlash. With upper house elections approaching in July, the Ishiba Cabinet is under pressure to secure an outcome that can gain public understanding and support.
  • Similarly, the Trump administration must also consider domestic political dynamics and industry expectations, because many U.S. companies investing in Japan are seeking greater stability in trade and investment relations. Against this backdrop, whether the two sides can negotiate an agreement that is both pragmatic and aligned with the long-term interests of the U.S.-Japan economic alliance remains a key question. In case Trump’s decision to approve Nippon Steel’s partnership with U.S. Steel represents a symbolic milestone in the evolving U.S.-Japan economic partnership, it may also serve as a catalyst for broader progress in the ongoing tariff negotiations.

Implications

  • Compared to the recent U.S.-U.K. agreement, talks between the United States and Japan are progressing more slowly. This is primarily due to the vastly different scale of trade: Japan exports nearly 1.5 million vehicles to the United States annually — approximately 15 times more than the U.K. exports. In addition, Japanese automakers produced 3.3 million vehicles in the United States in 2023, with a record high of 4 million in 2016. The highly integrated supply chains involving semiconductors and aircraft add further complexity to the negotiations.
  • There are expectations that the upcoming G-7 Summit in Canada could serve as a milestone for a bilateral agreement. While Minister Akazawa has not called the summit a deadline, government statements have become increasingly optimistic. After the second round of talks, Akazawa stated that a summit-level agreement in June would be desirable. Following the third round, officials reported that Japan and the United States had exchanged views on trade expansion and nontariff measures and economic security and agreed to continue close coordination in the lead-up to the summit.

We will continue to keep you updated on developments in Japan as they occur. If you have any comments or questions, please contact BGA Japan Managing Director Kiyoaki Aburaki at kaburaki@bowergroupasia.com.

Best regards,

BGA Japan Team

A small ginko leaf

Managing Director

Kiyo understands the Japanese business community inside and out from his three decades working for Japan’s most powerful business organization, Keidanren. He covers international trade and investment, defense and aerospace, information technology, entrepreneurship, deregulation and data privacy policy. He also played a leading role in developing and implementing political strategies for the private sector. Kiyo has led Keidanren’s strategic international initiatives since 2013, and most recently headed up the federation’s international engagement. He worked closely with former Prime Minister Yasuo Fukuda to establish Japan’s Track 1.5 dialogues with the United States and China. The dialogues produced important results by strengthening ... Read More