Trump joins Japan trade talks in surprise move, claims ‘big progress’ on tariff dispute

President Donald Trump entered the early stage of tariff negotiations with Japan on Wednesday, escalating what could have been a preparatory discussion into a diplomatic negotiation procedure. 

The meeting with the President of the White House was close to 50 minutes long, and it was with Japan’s chief trade negotiator, Ryosei Akazawa. Following this was a broader session with Treasury Secretary Scott Bessent and other key U.S. officials.

While Japan expected the discussions to be limited to trade and investment, Trump brought up additional topics, such as the share of expenses for the U.S. military in the country. Trump later posted on social media that the meeting was “big progress”, though he did not give more details. Akazawa revealed that both parties agreed to meet in the same month and found out that Trump deemed Japan a top priority in trade.

Japan was quite surprised by Trump’s participation, perceiving this as the green light for the United States to seek to dominate further talks with several partners. 

In an interview with reporters in Tokyo on Thursday morning, Japan’s Prime Minister Shigeru Ishiba stated,

“The government will continue to consider trade negotiations a top priority. Will visit the United States at the most suitable time for talks.”

Since Trump slapped the comprehensive tariffs in early April, more than 75 nations have sought negotiations.

Military spending and auto tariffs complicate the agenda

Apart from trade, Trump also criticized Japan on defense spending. He reportedly wants Tokyo to elevate the defense spending to $150 billion, or 2% of harsh effects beyond the $10 trillion already planned for the 2027 financial year. 

The Japanese authorities fear that the President of the United States could begin to demand 3%. Currently, the Japanese Defence budget is 1.8% of its GDP, and there are concerns that certain economic demands of the United States could encompass commitment.

Japan relies heavily on automobiles in its export market and is also subject to a 25% tariff. Although the administration has temporarily suspended most of the new surcharges for about 90 days, there is a 10% baseline tariff. 

Tokyo has called on Washington to rescind these measures and disconnect the renewal of the dollar-greenback exchange from trade negotiations. The dollar increased against the yen, as Akazawa clarified that the talks did not discuss foreign exchange manipulation.

Japan aims to offer investment as a solution

In an effort to alleviate tensions, Japan is introducing large-scale investment pledges in the United States as a response to tariffs. Among decisions under consideration, one might examine the Japanese participation in a multi-billion-dollar Alaskan gas scheme. Tokyo argued that such commitments can open up a “win-win” that does not depend on threats of trade retaliation.

Treasury Secretary Bessent said that Japan could be among the “first movers” to benefit from negotiations with the U.S. due to the international attention paid to Trump’s tariff system. However, negotiators may reach snap decisions that do not address the most critical trade imbalances.

Trump’s trade agenda remains aggressive. In early April, he said that Japan had levied a 700% tariff on rice, a claim that Tokyo has denied. The auto sector is one of the most affected, as it contributes to 30% of Japan’s exports to the U.S. and is highly affected by current and proposed duties.

At the time of writing, the pair is up by 0.49% for the day to reach 142.60 USD/JPY. Asian equities responded positively. Japan’s Topix index rose 1%, leading regional gains. Hong Kong’s Hang Seng index rose by 1.6%, while Australia’s S&P/ASX 200 was up by 0.6%. The Shanghai Composite added only 0.2%. Futures on the S&P 500 index also advanced 0.7%.