July 5 EST: With a hard deadline looming, Japan’s top trade envoy Ryosei Akazawa held two extended phone calls this week with U.S. Commerce Secretary Howard Lutnick, according to Japan’s Cabinet Office. These calls—on July 3 and again on July 5—mark the final push to keep a fragile tariff truce from collapsing.
The trigger? A 24% reciprocal tariff on Japanese goods that’s set to spring back into force next week if Washington and Tokyo can’t hammer out a deal.
Final Hours of a Costly Standoff
For months, Japan has been trying to defuse a tariff time bomb first planted during a bruising round of talks in early 2024. The current pause on reciprocal tariffs was only meant to buy time—enough for both sides to work out a longer-term trade arrangement. But with the July 9 expiration approaching, the stopgap is threatening to become a new problem.
The broader tension centers on a stubborn holdover: the 25% tariff on Japanese automobiles, which Japan has been trying to unwind since the Trump administration reinstated it last year. So far, those efforts have gone nowhere.
Tokyo has now softened its position, proposing what one Japanese official described to Reuters as a “scaled reduction”—a slow, conditional rollback of auto tariffs tied to export quotas and U.S.-based production targets.
That kind of give-and-take—common in NAFTA-era industrial deals—might get traction. But the calendar isn’t helping.
G7 Summit Is the Real Deadline
The public deadline may be next week, but the private one is tighter: Prime Minister Shigeru Ishiba is expected to present a deal during a scheduled bilateral sit-down with President Trump at the upcoming G7 summit in Canada.
That means negotiators aren’t just racing the clock—they’re racing to produce something that looks like a win.
Washington Wants More Rice. Tokyo Isn’t Budging.
One major sticking point: agriculture. The White House has made clear it wants Japan to open its market further—especially for rice, where Japan maintains tight import controls. But Tokyo’s position hasn’t moved.
Japan is already expanding rice imports to offset a domestic shortage, but officials say that’s a one-off move, not a door-opening gesture. Ishiba has reportedly told aides he won’t “negotiate with the farm vote”—a nod to his party’s deep ties to Japan’s agricultural cooperatives.
Real Risk of Retaliation
If no deal is reached, the 24% retaliatory tariffs are expected to snap back automatically—covering a wide swath of Japanese industrial exports, including machinery and components that feed directly into U.S. supply chains.
That would hit U.S. manufacturers too, especially in sectors that rely on Japanese parts for final assembly. It’s the kind of policy boomerang companies dread: Japan gets punished, and U.S. firms eat the cost on the backend.
Treasury Secretary Scott Bessent, who joined Akazawa and Lutnick in person during talks in Washington last week, has been warning allies that the White House will not extend the tariff freeze without concessions.
Japan’s Gamble: Trade-Offs Now, Stability Later
Sources close to Japan’s negotiating team say Tokyo is betting that a near-term compromise—especially on autos—could buy space to revisit the agricultural fight later. One plan floated: a “tiered auto deal” that eases tariffs on U.S.-bound Japanese EVs first, tied to job creation targets in the U.S. Midwest.
The risk, of course, is that Japan gives ground now and sees no relief later.
But with the G7 optics looming, both sides seem to know this isn’t just about tariffs anymore. It’s about signaling who sets the rules in a post-globalization economy—and how much leverage still matters.
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A Wall Street veteran turned investigative journalist, Marcus brings over two decades of financial insight into boardrooms, IPOs, corporate chess games, and economic undercurrents. Known for asking uncomfortable questions in comfortable suits.
