According to the mainstream media, the Group of Seven (G7) summit was a tense disaster, with world leaders re-enacting the iconic Russian roulette scene from The Deer Hunter film. Considering the news emerging from the recent annual event, the reality was that President Donald Trump wined and dined everyone, employing his Art of the Deal tactics, striking deals and advancing his goals.
Do you want a photo-moment that encapsulated the entire affair? Take a peek at Trump’s manspreading when seated next to Canadian Prime Minister Justin Trudeau’s cross-legged position – of course, you can’t ignore the horror of the pink socks!
US-Japan Trade Deal
On the eve of the G7 summit in France, US and Japanese trade representatives held talks in Washington. It was widely anticipated that two of the world’s largest economies were going to announce a partial trade agreement, also known as an early harvest, before signing a more comprehensive trade pact.
During the final day of the G7, President Donald Trump and Prime Minister Shinzo Abe announced to reporters that they had reached an agreement in principle.
The deal will concentrate on agriculture, industrial tariffs, and digital trade. The “very good news” for American farmers and ranchers is that the proposed arrangement is expected to open up Japan’s agricultural market to US goods to the tune of $7 billion.
Japan will import more corn, wheat, pork, dairy, beef, and wine; corn is critical for Japan right now because of a ballooning pest problem that impacts its domestic products. In exchange, the US will slash tariffs on Japanese industrial products, excluding automobiles.
For now, Tokyo and Washington have agreed to “core principles,” but the next step is putting it on paper.
“We have been working on a deal with Japan for a long time. It involves agriculture. It involves e-commerce. It involves many things. We’ve agreed in principle,” Trump said. “We’ve agreed to every point, and now we’re papering it and we’ll be signing it at a formal ceremony.”
The leaders told the press that they expect to sign officially in September at the United Nations General Assembly meeting.
The US-Japan trade handshake appeared to have come out of left field. Most observers had anticipated a drawn-out trade negotiation, much like the US-China kerfuffle. But both men needed this victory: Trump is heading into an election year, and Abe is facing the possibility of a recession.
The news also is interesting for a couple of reasons.
Recently speaking to a crowd of supporters in Pennsylvania, President Trump lamented Japan’s wheat imports, telling a crowd: “We send them wheat, wheat. That’s not a good deal. And they don’t even want our wheat.” He added that Tokyo buys wheat only “because they want us to at least feel that we’re okay. You know, they do it to make us feel good.”
The unhappy wheat industry tweeted immediately after his remarks:
“Mr. President, Japan is the #1 market for US wheat exports on average. They don’t buy our wheat because ‘they want us to feel okay.’ They buy it because it’s the highest quality wheat in the world. That’s not fake news.”
Meanwhile, the Japanese leadership had made it clear from the first day of talks that Tokyo would not concede its leverage without significant concessions in return and that any mini-deal would be unacceptable. But with an unpopular national sales tax on the horizon, falling exports, and declining foreign investment in Japanese financial markets, Abe eliminated the volatility and uncertainty that trade disputes generate by verbally agreeing to a new one
However, the prime minister is not out of the woods yet. Any trade development needs to be approved by the parliament.
A Nod to China and North Korea?
The lack of theatrics, not something President Trump has been known for, cannot help but make you wonder if there is something more to this sudden announcement.
North Korea is misbehaving again, attempting to capture the attention of the international community like a petulant child by shooting off short-range missiles. President Trump does not seem too concerned, noting that his recent acts do not violate the terms of their agreement. But perhaps we will learn on paper that the US-Japan pact might include some sort of security arrangements.
The US-China trade war recently escalated yet again. Beijing will impose 5%, 10%, and 25% tariffs on $75 billion in US goods on Sept. 1 and Dec. 15, despite the White House postponing levies by more than three months. This retaliatory measure prompted Trump to ask who his bigger enemy is: President Xi Jinping or Federal Reserve Chair Jerome Powell?
So, is Trump trying to send a message to China by working out a relatively quick deal? Or is Japan using this opportunity to offset the dramatic losses in trade with China? In July, Japanese exports to China tumbled 9.3% year-on-year, representing the fifth straight month of declines, which were driven by auto parts (35%), semiconductor production equipment (31.5%), and electronics parts (19%).
Indeed, perhaps this is all part of Trump’s 4D chess strategy.
Moving ahead with the USMCA, getting an important trade deal with Japan done, and proposing the reinstatement of Russia — that’s not bad for a weekend. The most important development, however, was Trump making his counterparts appear, once again, like little lambs as the ferocious lion consumed his prey and went back to his den to tweet.