[fn Editorial] Analyze US-Japan Tariff Agreement and Focus on National Interest First Negotiations

With nine days left before the mutual tariff suspension date (August 1) proposed by the United States, the United States and Japan have concluded tariff negotiations. First, the mutual tariff imposed by the United States on Japanese imports was reduced by 10 percentage points from the original 25% to 15%. The item tariff on Japanese cars imported into the United States was also reduced to half (12.5%) of the previous rate (25%).

In return, the price Japan paid was very high. The scale of investment promised by Japan to the US amounts to 550 billion dollars (about 760 trillion won). This far exceeds our country's annual budget for this year (673 trillion won). It is also known that Japan's car market, where imported cars have struggled, has been partially opened. It seems that non-tariff barriers, such as expanding subsidies when American trucks or passenger cars enter Japan, have been lowered.

Japan is also rumored to have promised investment in liquefied natural gas (LNG) in Alaska, which has low business potential. Ultimately, Japan seems to have lowered the tariff rate in exchange for opening its car market, which accounts for more than 80% of its trade surplus with the US, and for massive direct investment and agricultural market opening. President Trump even boasted that it was "the largest scale of negotiations so far." On the same day, Indonesia and the Philippines also agreed to apply a lower mutual tariff of 19% in exchange for opening their automobile, agricultural, and pharmaceutical markets. So far, the countries that have concluded tariff negotiations with the United States total five, including the United Kingdom and Vietnam.

Looking at the negotiation conclusion process of these countries, there is much to learn for us, as the first economic team of the Lee Jae-myung government has fully mobilized to enter the final negotiations with the United States. In particular, the negotiation results of Japan, whose industrial and export ecosystems are 'similar' to ours, can serve as a kind of 'barometer.' Considering that the areas conceded by the five countries in exchange for lowering tariff rates are automobiles, agriculture, pharmaceuticals, and direct investment, we can somewhat gauge the scale and level of the 'Trump bill' we will be presented with.

Among these, the task is to at least draw out mutual and item tariff reductions to the level of Japan (15%) in the Korean automobile sector, which accounts for 72% of the trade surplus with the US. If the tariff on Japanese cars exported to the US is lower than ours, the Korean automobile industry will be hit hard in terms of price competitiveness.

The problem is that the results of Japan's negotiations can also act as a negative factor in the final negotiation process. While it can serve as a reference for us, who aim to 'give the least and gain the most,' we cannot rule out the possibility of becoming a victim of the so-called 'convention effect,' where the US tries to achieve more results than Japan.

The United States is expected to pressure by presenting cards for cooperation in areas such as automobiles, rice and other agricultural products, pharmaceuticals, beef imports over 30 months, digital regulation easing, defense cost increases, direct investment, and Alaska LNG investment at the '2+2 trade talks' scheduled for the 25th. However, we must not rush recklessly using the US-Japan agreement as an excuse and risk making the mistake of 'giving more and receiving less.' At present, it is time to thoroughly analyze Japan's case, which is in a similar situation to ours, and employ a strategy of a 'package deal' centered on practicality and national interest.