By Vaibhav Tandon

The Japanese are known for their patience and good conduct, especially when it comes to queue etiquette.  Whether in restaurants, theme parks, or transit stations, Japanese people will wait for hours without complaint. 

Tokyo is near the front of the queue for trade negotiations with the U.S.  Both sides have expressed optimism on reaching an agreement.  But with some key issues unresolved, the Japanese may need to wait a bit longer to restore low or tariff-free access to the U.S. market.

Japan has been hit with the 10% universal tariff applied to all nations, along with 25% sectoral levies on autos.  24% reciprocal tariffs have also been proposed by the White House; these have been paused until early July.

In an effort to get this burden lifted, Tokyo has reportedly offered to buy more American liquified natural gas, farm products and automobiles.  Even before the April tariff announcement, Japan had pledged to boost investment in the U.S. by over $200 billion to total $1 trillion in the coming years.

But talks appear to have stalled over the U.S. sectoral levies.  The Trump administration is willing to discuss the removal of the reciprocal tariffs, but it is inclined to maintain the 25% duty on Japanese autos, steel and aluminum.  This strong stance comes in spite of the fact that major Japanese automakers are operating manufacturing facilities in the U.S., a key goal of the Trump administration. 

The impasse suggests that reducing the trade deficit may not be the sole criteria to secure a trade deal with the Trump administration.

Concessions on the auto sector are vital for Japan.  The U.S. is the biggest market for Japanese goods, representing one-fifth of Japan’s total exports.  Autos and auto parts account for one-third of its exports to America.  The sector is a source of employment for over 8% of the country’s workforce. 

Tariffs are already starting to take a toll on the industry.  According to the country’s chief negotiator Ryosei Akazawa, “one Japanese carmaker is already losing $1 million an hour.”   

America’s trading partners are watching the negotiations closely to see how Japan fares in its bid to secure a reprieve from U.S. tariffs.  A deal could become a template for other negotiations; a failure would identify pitfalls for others to avoid.  With the U.S. holding its ground on some of the recent tariffs, trade talks with the United States may prove to be a real test of Japanese patience.