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Investing.com - A trade agreement reached between the U.S. and Japan is "largely a wash" that will leave the average tariff rate on Tokyo at around the 15% level it was at before the pact was announced, according to analysts at Barclays (LON:BARC).
Earlier this week, U.S. President Donald Trump said his administration had completed a “massive deal” with Japan, which will see the Asian country agree to a baseline 15% tariff on its exports to the U.S.
Crucially, Japan’s all-important auto industry, which accounts for over a quarter of the country’s exports to the U.S., will see its levies set at the same rate.
Trump said that Japan will also invest $550 billion into the U.S., of which the U.S. will “receive 90% of the Profits.”
“Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%,” Trump said in a social media post.
Announcement of the deal comes shortly after reports said Japan’s top trade negotiator, Ryosei Akazawa, met Trump in the White House on Tuesday.
While the 15% tariff is lower than the 25% initially outlined by Trump, it still goes against Tokyo’s earlier demands that Japan be exempt from all U.S. tariffs. The 15% levy is likely to take effect from August 1, when Trump’s other reciprocal tariffs against major economies are set to take effect.
In a note to clients, the Barclays analysts led by Michael McLean argued that while the tariffs did not "get worse" for Japan, "they did not get much better" either.
"Japan traded a lower tariff rate on autos for a higher reciprocal tariff. In the end, it’s largely a wash," McLean said.
"It remains to be seen to what extent the deal increases U.S. exports to Japan, but we are skeptical" based on the track record of a prior U.S.-Japan trade agreement in 2019, McLean added, noting that export data from that time does not show an uptick in U.S. goods sent to Japan.
The "most interesting part" of the pact is Washington’s softening of auto tariffs, McLean argued.
"Could it foreshadow a pivot from the administration to make material deals on other sectoral tariffs where to date very few, if any, exclusions or exemptions have been granted? That would be a significant pivot," McLean said.