A new trade war threatens to break out between the United States and Japan as Washington considers imposing the toughest sanctions ever against its Asian ally.
US trade officials announced over the weekend that they are considering steep new tariffs on a variety of Japanese imports. The measures are designed to hit Japan's export machine where it hurts most: on luxury cars, minivans, and auto parts coming into the US.
While the auto sector is the largest component of the US trade deficit with Japan, the broader issue is Tokyo's failure to redress its stubbornly high trade surplus with the US. This, despite years of negotiations in which Japanese trade officials pledged to open up their markets.
Bilateral talks over auto issues broke down last week, after US officials failed to convince their Japanese counterparts to sign an agreement committing them to big increases in purchases of US auto parts. After a May 6 meeting at the White House of the President's National Economic Council (NEC), US Trade Representative (USTR) Mickey Kantor told reporters that the group had ''considered all the options available.''
Chief among those, the Japanese have long suspected, has been Washington's refusal to prevent the further fall of the US dollar. Its decline has made exports of US goods and services cheaper, and the price of Japanese goods comparatively higher. US policymakers, especially Treasury Department officials, strongly deny the use of exchange rates to manipulate the US trade imbalance. But US trade officials do argue that Japan would not be assuming a burden by beefing up US auto parts purchases, because the higher yen and lower dollar have slashed the cost.
Mr. Kantor and President Clinton met this weekend to review the NEC's recommendations. Should Mr. Clinton press ahead with the record-breaking sanctions, the USTR would publish a list of Japanese imports targeted for punitive tariffs. The move would begin a review period to allow US firms to lobby for the removal of products from the list.