During the early May Japan-US tariff negotiations, the parties reached an impasse over the issue of tariff removal. Although the Japanese side repeatedly urged the US to fully lift tariff measures, the Trump administration took a hard line, only agreeing to limited discussions on a 14% tariff for specific items and refusing to cancel the 10% baseline rate. This stance put Japan, which hoped to reach an agreement before June, in a strategic dilemma.
According to sources, Japanese Minister of Economic Revitalization Akira Amari has repeatedly asked the US to remove high tariffs on steel, cars, and their parts, some of which are as high as 25%. However, US Secretary of the Treasury Bessant only indicated that they might consider extending the "exemption period" for some tariffs or reduce the rates, using a quota management approach similar to the Biden administration's handling with the EU. For Japan, this ambiguous and conditional promise falls far short of the negotiation goal of "full removal."
Japanese Prime Minister Shigeru Ishiba stated after the meeting that no consensus had been reached between the US and Japan, especially since excluding auto tariffs from negotiations makes it difficult to achieve an agreement. He pointed out clearly that the tariff issue is the core premise for any potential agreement.
The US's hard stance not only makes it difficult for Japan to accept but also reflects the Trump administration's consistent "America First" strategy. Since March 2025, the US has imposed tariffs in stages and officially launched a 10% unified baseline rate in April, increasing pressure on global trade partners. Japan, as an ally, has received no special treatment.
In addition, US economic data shows the trade deficit surged to $140.5 billion in March, marking a historical high and representing a 14% increase month-on-month. The Department of Commerce explained that businesses imported a large volume of goods in advance due to concerns over impending tariffs, leading to a short-term spike in imports. Economists believe this is one of the main reasons the US GDP recorded its first negative growth in three years during the first quarter.
Trump insists that imposing tariffs will not only help increase fiscal revenue and address the budget shortfall caused by tax cuts, but also revitalize domestic manufacturing. Nonetheless, the market broadly anticipates that with the surge in imports subsiding in May, the US economy is expected to moderately rebound in the second quarter.
Meanwhile, investors are also focusing on the upcoming Federal Reserve interest rate decision. According to the CME's "FedWatch Tool," the market is predicting a 96.9% likelihood that interest rates will remain unchanged. Chris Larkin, an executive at Morgan Stanley's E-Trade unit, stated that the market does not broadly anticipate a rate cut, and investment banks such as Barclays and Goldman Sachs have postponed their first rate cut expectations from June to July.
Although Japan continues to actively seek breakthroughs in the current negotiations, given the US's attitude, it is feared that the next round of talks in mid-May might not break the impasse. Analysts indicate that Japan will have to make a difficult balancing act between safeguarding its core industry interests and continuing to deepen US-Japan relations.
