What does the US-Japon trade deal for Asia and the world mean

US President Donald Trump called The agreement he reached with Japan, “the biggest trade deal in history.”

It may be premature to make such allegations, but this is certainly the most significant deal since Trump announced his so-called tariffs for April Liberation Day, which shook the stock markets and created chaos for global trade.

After months of negotiations, Japan Prime Minister Shigeru Ishiba said he expects the deal to help the global economy.

This is a great statement. BBC examines if it will be and if so, how?

Japan is the fourth largest economy in the world, which means it is a large part of world trade and growth.

Tokyo brings a lot of energy and food from abroad and depends on exports, including electronics, machines and motor vehicles.

The United States is its largest export market.

Some experts have warned that Trump’s tariffs can tear down as many Japan’s percentage by pushing it into a recession.

With the smaller rates, exporters will be able to do business in the United States more cheap than if Trump had adhered to a higher threat to collecting higher taxes.

And the deal brings security that allows businesses to plan.

The announcement also strengthened the Japanese yen over the US dollar, giving manufacturers more purchasing power to buy the raw materials they need to expand their business.

The US agreement is especially good for Japan’s car giants such as Toyota, Honda and Nissan. Previously, US importers had to pay a tax by 27.5%when they were delivered to Japanese cars.

This is already reduced to 15%, which potentially makes Japanese cars more expensive than Rival China likes.

Having said this, US car manufacturers have signaled that they are dissatisfied with the deal.

They are worried that they have to pay a 25% tariff for imports from their plants and suppliers to Canada and Mexico compared to 15% of Japan.

In exchange for reduced tariffs, Japan has suggested investing $ 550 billion in the United States to enable Japanese companies to “build sustainable supply chains in key sectors such as pharmaceuticals and semiconductors,” Ishiba said.

Japan is now a major investor in the United States, but this amount of money should create jobs, make quality products and encourage innovation.

According to the deal, Trump stated that Japan would increase purchases of agricultural products such as American rice, which can help the lack of rice in the country – Even if the local farmers concerned about losing a market share.

The 15% tariff is also a benchmark for other countries such as South Korea and Taiwan, which are conducting their own trade negotiations with the United States.

South Korea Minister said he would carefully consider the terms of what Japan agreed with the United States while heading for Washington for commercial talks.

Japan and South Korea compete in industries such as steel and cars.

In a broader terms, the US and Japan deal will put more pressure on other countries -especially the main exporters of Asia -to provide better agreements before August 1.

Deals with Vietnam, Indonesia and the Philippines have already been announced.

But some Asian countries will suffer.

The smaller economies such as Cambodia, Laos and Sri Lanka produce exporters and they have little to offer Washington in terms of trade or investment.

The US has been reported to have called on Japan to increase military spending.

But Tokyo’s tariff envoy explained that the deal included nothing about defense costs.

Ryosei Akazawa added that steel and aluminum rates will remain at 50%.

Both can be profits for Japan as it exports more vehicles to the United States than steel and aluminum.

It is also the pressure on the US to receive as many of these transactions in front of the line before a deadline for a separate tariff in August.

Along with negotiations with the US, countries may start looking for more reliable partners elsewhere.

On the same day, when Washington and Toyko announced their agreement, Japan and Europe promised to “work more together to counteract economic coercion and to deal with unfair commercial practices,” according to European Commission President Ursula von der Leyen.

The European Union is yet to agree to a trade deal with the United States.

“We believe in global competitiveness and it must be beneficial for everyone,” said G -Ja Von der Leyen.