How disruptive would new tariffs be, both for South Korea and Japan and the US? | DW News

Key Concepts:

• Tariffs: Taxes imposed on imported goods.
• Trade Deficit: The amount by which a country's imports exceed its exports.
• Reciprocal Tariffs: Tariffs imposed by one country in response to tariffs imposed by another country.
• Factory Utilization Rate: The percentage of a factory's capacity that is being used.
• Sector-Specific Tariffs: Tariffs that apply only to certain industries or products.
• National Security Threat: A risk to a country's safety, defense, or international relations.

Tariff Announcement and Deadline:

• Donald Trump announced 25% tariffs on goods from Japan and South Korea, effective August 1st.
• This followed a 90-day negotiating deadline that ended on Wednesday.
• Trump warned Japan and South Korea against retaliating with their own tariffs, threatening to raise tariffs further.
• He cited the US trade deficit with these countries as a major threat to the US economy and national security.

Negotiation Challenges with Japan:

• Japan was surprised by the lack of flexibility in negotiations with the Trump administration.
• Trade envoy Akazawa visited Washington D.C. multiple times, even meeting with Trump in the Oval Office.
• The main sticking point was the 25% sector-specific tariffs on automobiles, which Japan considered problematic.
• The Trump team was willing to negotiate reciprocal tariffs but considered the auto tariffs non-negotiable.

Economic Impact of Tariffs:

• Automotive tariffs would significantly impact Japan, as cars and auto parts constitute about 30% of its exports to America.
• South Korea would also be affected.
• The Trump administration suggested increasing factory utilization rates of existing Japanese and South Korean auto plants in America or bringing more production to the US to avoid tariffs.
• Japanese and South Korean companies already have substantial local production in America.
• The tariffs would primarily affect smaller-lot cars that don't justify local production, reducing options for American consumers.
• Consumers would have fewer choices, mainly being able to buy mass-produced cars like Camry and Corollas that are locally built.

Political Considerations in Japan:

• Japan has an upcoming upper house election on July 20th.
• Prime Minister Sheiba faced difficulty making concessions on buying American rice before the election due to the importance of the agricultural vote for the ruling Liberal Democratic Party (LDP).
• Concessions on agriculture might be possible after the election but before August 1st.
• It is difficult to reduce the trade deficit immediately.

Broader Geopolitical Implications:

• Japan believed its geography was critical for America in countering China.
• Trump's actions suggest he doesn't see China as an immediate national security threat and is willing to separate trade and national security.

Notable Quotes:

• Trump, via Truth Social, warned Japan and South Korea not to retaliate with tariffs or he would raise tariffs even more.

Conclusion:

The Trump administration's decision to impose tariffs on Japan and South Korea highlights the administration's focus on reducing the trade deficit, even if it means disrupting trade relationships and potentially harming American consumers. The move also suggests a shift in the US approach to national security, with trade considerations potentially outweighing geopolitical alliances. The tariffs could have significant economic consequences for Japan and South Korea, particularly in the automotive sector, and may lead to further negotiations and concessions after Japan's upcoming elections.