U.S. Promised Windfalls From Japan Deal. Tokyo Has Other Ideas.

[muriel_volestrangler]

TOKYO—Japan is playing down the risks from its trade deal with President Trump after the White House said the U.S. would direct $550 billion in investments by Japan and keep 90% of the profit.

Tokyo’s chief negotiator, Ryosei Akazawa, said Monday that the government bank at the center of the investment deal would strictly review the projects it is asked to finance and approve only those that comply with Japanese law. Critics of the deal have suggested Tokyo would have to follow Trump’s orders on what to fund, potentially threatening the finances of the Japan Bank for International Cooperation, or JBIC.

Over the weekend, Akazawa said that only 1% to 2% of the $550 billion amount would be actual investment, with the rest coming in the form of loans and loan guarantees.
...
“President Trump’s statement about ‘90% of the profit to the U.S., 10% to Japan’ is purely to draw the attention of his domestic supporters,” Kumano said. The actual deal “doesn’t sound so bad,” he said.

https://www.wsj.com/world/asia/u-s-promised-windfalls-from-japan-deal-tokyo-has-other-ideas-da46a756 archived at https://archive.ph/nsPh5

Via Professor Krugman:

Trump has now announced a trade “deal” with the European Union that looks a lot like the “deal” he made with Japan. I use scare quotes because there is little sign of a quid pro quo. The United States is imposing a 15 percent tariff that is lower than previously threatened, but still vastly higher than we had before Trump. Overall U.S. tariffs seem likely to settle roughly at the level that prevailed after the infamous Smoot-Hawley tariff of 1930.

In return we got a vague promise of higher European investment in the United States. When Japan made a similar promise last week, administration officials asserted that this would mean hundreds of billions flowing into rebuilding U.S. industry. Japanese officials, however, say that the money will consist almost entirely of loans and loan guarantees. This strongly suggests that Japan will, if it does anything at all, simply be sticking Trump’s name on money flows that would have happened anyway. There’s every reason to suspect that the same will be true of whatever the EU does.

And like the Japan deal, this deal seems to place lower tariffs on cars made in Europe, which have very little U.S. content, than on cars made in Canada, which contain many American parts. Add in the punishing tariffs on steel and aluminum, and Trump’s trade policy seems, if anything, to be tilting the playing field against U.S. manufacturing.
...
OK, I can answer that. If I had been in charge of negotiating with the European Union, I would have been able to get a deal with the following components:

· Very low tariffs on U.S. exports of manufactured goods to Europe, on the order of 1 percent
· Near balance in bilateral trade, with U.S. exports to Europe close to 90 percent of our imports from Europe
· U.S. companies allowed to operate freely in Europe, earning hundreds of billions a year in profits
· European corporations investing more than $150 billion a year — real investment, not loans — in the United States

Why do I believe that I could have negotiated a deal like that? Because that’s what U.S.-EU international transactions actually looked like in 2024. So that’s what we could have gotten by doing nothing.

https://paulkrugman.substack.com/p/i-coulda-made-a-better-deal