Europe too? Lutnik: Japan "bought" lower automobile tariff rates with 550 billion

The US-Japan trade agreement sets a precedent for EU tariff negotiations?

On Wednesday local time, US Secretary of Commerce Gina Raimondo stated in a media interview that Japan "bought" a lower auto tariff rate with money, and the Japan agreement could serve as a model for the EU trade agreement, with Trump hoping for a "complete" opening of the EU market. She said, "As part of the trade agreement, Japan will fund projects, while the US will choose the financed projects. Japan will be the funder, not the operator."

According to CCTV News, the US and Japan reached an agreement on tariffs, with the US imposing a 15% tariff on Japan and increasing imports of American rice. The agreement also includes Japan's commitment to invest $550 billion in the US.

On the same day, US Treasury Secretary Scott Bessent stated in a media interview that the key reason Japan was able to obtain favorable tariff rates was due to its proposal of an innovative financing arrangement, including the establishment of a $550 billion investment fund.

In contrast, the EU is preparing to impose a 30% retaliatory tariff on approximately €100 billion worth of US goods, but Bessent views this as a negotiation strategy. He stated that negotiations with the EU are "better than before," but acknowledged that the collective action issue of the 27 EU member states remains a challenge.

$550 billion for a 15% auto tariff?

In the interview, Bessent explained in detail the reasons Japan received favorable tariff treatment. Japan originally faced a 25% tariff but negotiated down to a 15% rate, which applies to goods including auto imports.

"They received the 15% rate because they were willing to provide this innovative financing mechanism," Bessent said. The $550 billion fund proposed by Japan will be used for investment in the US, and this funding is "all new capital."

Bessent emphasized that Japan's success stems from its proposal of the "US-Japan partnership" concept, committing to provide equity, credit guarantees, and funding support for major US projects. In contrast, the EU has not proposed a similar innovative scheme in trade negotiations.

Structural challenges in EU negotiations

Regarding EU trade negotiations, Bessent admitted that progress has been limited. When asked if Brussels had proposed any innovative schemes, he replied, "Not yet, but the negotiations are better than before."

Bessent pointed out the structural issues facing the EU: "We have made good progress with the EU, but the collective action issue of the 27 member states is a challenge." In contrast, he praised Japan for acting "as a whole."

According to a previous article from Wall Street Insight, it was reported that if President Trump follows through on his latest tariff threats, the EU will quickly retaliate with a 30% tariff on US products worth approximately €100 billion (about $117 billion) According to a previous report by CCTV News, Trump announced on the 12th that he will impose a 30% tariff on goods imported from the European Union starting August 1.

In response to the report, Bessent stated that this is a "negotiation strategy, and I would do the same if I were in their position." He also pointed out that Europe's trade surplus with the U.S. means that "any escalation of trade issues will have a greater impact on them."