Last week, I pointed to two key risks facing the Japanese economy:
(1) a letter from President Trump notifying new tariff rates, and
(2) the Upper House election on July 20.
Indeed, on July 7, President Trump posted on his social media platform Truth Social a letter announcing that Japan’s tariff rate would be raised to 25% starting August 1. This rate is one percentage point higher than the 24% reciprocal tariff rate announced on April 2.
The letter began with a condescendingly polite preamble:
“It is a Great Honor for me to send you this letter in that it demonstrates the strength and commitment of our Trading Relationship, and the fact that the United States of America has agreed to continue working with Japan, despite having a significant Trade Deficit with your great Country.”
It then unilaterally declared:
“We have had years to discuss our Trading Relationship with Japan,” but the U.S.-Japan relationship remains “far from Reciprocal,” and therefore, “we will charge Japan a Tariff of only 25% on any and all Japanese products sent into the United States, separate from all Sectoral Tariffs.”
The letter shocked the Japanese government, revealing that tariff negotiations had made no progress.
