US, Japan sign trade deal to lower tariffs on agricultural goods

UPDATE: Oct. 8, 2019: The U.S. and Japan signed an initial trade deal related to agricultural products Monday afternoon.

"Once this agreement enters into force, Japanese tariffs will be completely eliminated ... and substantially reduced over 90% of the United States agricultural exports," Trump said at the signing.

Dive Brief:

The U.S. and Japan have taken the initial steps toward a trade deal between the two nations, lowering or removing tariffs on a number of products, the Office of the U.S. Trade Representative (USTR) said in a press release. Negotiations will continue to formulate a "comprehensive agreement."
Under the initial deal, Japan will lower or eliminate tariffs on agricultural imports from the U.S. worth $7.2 billion. Japan will reduce tariffs on frozen and fresh beef and pork and eliminate duties on almonds, blueberries, broccoli, wine, cheese, tomato paste and more. Trump said the deal will help reduce the chronic U.S. trade deficit with Japan, which reached $67 billion last year, The Wall Street Journal reported.
The U.S. will also reduce or remove tariffs on some agricultural imports from Japan valued at $40 million, which include persimmons, green tea, soy sauce and chewing gum.

Dive Insight:

A tentative agreement between the U.S. and Japan was reached in August, but disagreement over tariffs on Japanese autos delayed it until now, USA Today reported. Although that element is still not resolved, sufficient progress was made on agricultural exports to potentially assist U.S. farmers who lost market share after Trump withdrew the U.S. from the Trans-Pacific Partnership in January 2017.

The 11 remaining TPP signatories — including major U.S. trading partners such as Canada, Mexico and Australia — subsequently moved ahead with trade arrangements, leaving the U.S. to look on from the sidelines. This limited agreement with Japan could bring some U.S. commodities back on par with goods from those countries and help boost agricultural export supply chains.

Farm and ranch groups in Montana praised the agreement, since Japan is the largest foreign buyer of the state's wheat and the biggest purchaser of U.S. beef, according to the Billings Gazette.

"It’s just been such a rollercoaster for a year and a half. We just need to see the U.S. finish a deal," Lola Raska, executive vice president of the Montana Grain Growers Association, told the newspaper.

This agreement would help beef and pork producers because it lowers tariffs from 38.5% to 27.6% beginning in January and gradually steps them down to 9% by 2033, the Gazette reported.

Farmers for Free Trade, a coalition of ag commodity associations, called the agreement "a step in the right direction." But it also expressed concern over the U.S.' continuing trade dispute with China.

"Our farmers need trade wins, not trade wars," the group said in a statement. "We hope this new agreement leads to more wins, as well as progress in achieving a better trade relationship with China."

California's Wine Institute was particularly pleased by the agreement because it would phase out the 15% tariff on bottled wine by 2025. President and CEO Robert Koch said in a release the U.S. has been the only major wine-producing country paying it.

Once further details of the agreement are known and a final agreement signed, Trump could benefit by being viewed more positively in farm country, which has suffered from the impacts of his trade disputes.

Agriculture Secretary Sonny Perdue recently called the president the "best advocate" for the sector and suggested the industry get behind his trade approaches — such as the United States-Mexico-Canada Agreement to replace the North American Free Trade Agreement — and lobby Congress for their passage.

It's possible this tentative deal and the perception of progress could start to alleviate losses and move things forward for U.S. commodity producers and food manufacturers, but the Chinese tariff situation remains a thorn in their side.