US President Trump has once again sown confusion by indicating that the US may still join the Trans Pacific Partnership. However, he indicated that this would require a renegotiation of the agreement, which looks unlikely. We think that the US will instead use the recent tariffs on aluminium and steel combined with the threat of additional import duties as a bargaining tool to force Japan to sign a bilateral free trade agreement. This would benefit Japanese exporters and consumers though those gains wouldn’t materialise for years.
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