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What’s at Stake in U.S.-Japan Trade Talks

High-level interest

High-level interest

Photographer: Yuri Gripas/Pool via Bloomberg

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More than two years after U.S. President Donald Trump walked away from a regional Asia-Pacific trade agreement, the U.S. and Japan -- the world’s largest and third-largest economies -- are negotiating a deal of their own. Both sides insist they want a “win-win” outcome, but as evidenced by the Trump administration’s tariff battles with China and the European Union, there’s potential for serious economic damage if things go bad.

Trump abhors trade deficits and is determined to reduce the one the U.S. has with Japan, particularly by gaining more access for exports by American farmers and automakers. Japan, under Prime Minister Shinzo Abe, wants to head off Trump’s threatened penalties on autos and auto parts, which could tip it into recession, as well as any “currency clause” directed at the Japanese yen.