Japan racks up trade deficit amid threat from Donald Trump's tariffs

Japan sank into a trade deficit of 2.2 trillion yen ($15 billion) for the first six month of this year, according to government data released Thursday, as exports were hit by President Donald Trump's tariffs.

In June, Japan's exports slipped 0.5 per cent from a year earlier after its shipments of vehicles and other products were slapped with a 25 per cent tariff. Trump has postponed implementing that higher import duty until Aug. 1, to allow time for negotiations but so far no deal has been reached.

Exports in June totaled nearly 9.2 trillion yen ($62 billion), in the second straight month of declines. Imports in June rose 0.2 per cent to 9 trillion yen ($61 billion), the Finance Ministry said. That left a trade surplus of 153 billion yen (just over $1 billion). The trade deficit in May was 637.6 billion yen, or $4.4 billion.

 

Japan's exports to the United States fell 11 per cent in June, with auto exports plunging 25 per cent. Shipments to China decreased by nearly 5 per cent. Exports to Mexico, a major auto assembly hub for North America for Japanese automakers, fell nearly 20 per cent.

In the first half of the year, Japan's exports totalled 53.4 trillion yen ($360 billion), up 3.6 per cent, while imports rose 1.3 per cent to 55.6 trillion yen ($375 billion).

Japan and the US have been holding trade talks, with Japanese officials stressing that Japan is a key US ally.

Trump has focused on rice, a sector traditionally protected from foreign competition for the sake of Japan's food security. Japan imports more than 300,000 tons of rice a year from the US, according to various data, although some of that is used for animal feed.

Japan will hold an election for the Upper House of Parliament on Sunday. Given falling public support for Prime Minister Shigeru Ishiba's administration, the conservative and pro-business ruling Liberal Democratic Party could lose its majority unless it gains another coalition partner.

Japan's economy contracted at an annual rate of 0.7 per cent in the first quarter of this year compared to the previous quarter, partly due to slowing exports.