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US and Japan rush to finalize trade deal within Trump’s tight deadline

The US and Japan are still negotiating specifics of the trade agreement that President Donald Trump plans to complete this month including whether, according to people familiar with the matter, he will refrain from placing higher tariffs on imported cars.

Trump praised what he called a “big agreement” at the Group of Seven meetings in France last month, which he and Prime Minister Shinzo Abe would sign on the sidelines of the General Assembly of the United Nations, set to begin later this month in New York.

Yet people familiar with the talks said the leaders settled only on a trade deal’s broad strokes. Numerous vital elements are being negotiated by negotiators, including how much Japan is willing to open up its agricultural market to US imports, reductions in automotive duties and digital trade –which could influence US internet companies like Inc. and Google Alphabet Inc.

Many sources in and around the US-Japan trade talks reported that, despite the tight timeframe, it is unlikely to reach an agreement in the next few weeks before the UN conference.

Japanese officials were caught by surprise when Trump called a G7 news conference in theory to announce a settlement, people close to the conversations said. The crisis moved so fast that there was not even time for the Japanese government to invite reporters to attend the briefing.

Also, before an explicit agreement on the most contentious issue on the negotiating table came the announcement, the people said. Although Trump told reporters that “at this moment” the US would not impose new tariffs on cars and car parts imported from Japan, the president was not explicit as to whether he would have agreed to that as a concession. And Trump kept alive the tariff risk by saying that at a later date, he could still enforce the levies. Protecting against the threat of auto tariffs is Japan’s primary demand.

Trump postponed a decision to impose new levies on imported vehicles for national security reasons until November earlier this year, allowing more time for negotiations with Japan and the European Union.

A US Trade Representative’s Office spokesperson did not respond to a comment request.

Some people on the negotiating side of the US have expressed optimism about reaching a speedy deal because it would benefit American farmers— Trump’s core constituency, and a group that was among the worst hit by his escalating trade war with China.

Japanese officials regard the completion of the agreement as the start of a tense era between the two countries dominated by trade frictions, they said.

Trade officials and lawyers are now working to iron out the final details, translation and legal wording through video-conference. There is likely to be no need for a meeting between the top trade negotiators of the countries, the people said.

Yet, according to people involved in the talks, the leaders may be left to find themselves with a decision on Trump’s proposed auto tariffs.

One official said the issue might be dealt with in a separate document, outside the text of the trade.

Japan would prefer a legally binding agreement, said people familiar with the issue. We cited Trump’s decision earlier this year to place a 5% tariff on all goods coming from Mexico on illegal immigration issues shortly after agreeing to the USMCA trade agreement with that nation and Canada as a reason. Eventually, the US and Mexico struck a deal, and Trump called off the obligation that was being challenged.

Shielding Japan’s automotive industry from crippling tariffs would be an embarrassment for Abe, who has been trying to build a personal relationship with Trump.

Another highly controversial field is the elimination of tariffs under the new agreement. Japan requires specific segments of the car to cut or remove current duties. Yet US Trade Representative Robert Lighthizer bristled at such appeals at last month’s G7 session.

Toshimitsu Motegi, Lighthizer’s counterpart, appeared at a meeting of a ruling Liberal Democratic Party trade committee on Sept. 3 but did not make any specific statement on the substance of the talks. According to media reports, Abe could move Motegi to the role of foreign minister next week in a cabinet reshuffle.

Officials say both sides are seeking to be innovative to balance the agreement. Some people close to the talks say there is an option for the US to cut levies on industrial parts that are not exclusive to the automotive sector but can be used in other applications, such as farm machinery.

The sides had planned to move to the next phase in the talks after securing an initial limited agreement to ensure a more comprehensive deal. But those involved in the negotiations have raised doubts as to whether the second stage of the talks would soon end.

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