A landmark $550 billion trade pact between the United States and Japan has been thrown into chaos, after Tokyo’s top trade negotiator abruptly canceled a high-stakes visit to Washington at the last minute on Thursday.
The shock move derails talks that were meant to finalize the massive investment-for-tariff-relief deal, revealing a deep and unresolved snag that now threatens the entire agreement.
The cancellation is a stunning reversal, coming just as the deal seemed poised for a victory lap.
US Commerce Secretary Howard Lutnick had himself declared that an announcement on the Japanese investment was expected this very week. Instead, a diplomatic stalemate has taken hold.
A matter of trust: the standoff over who acts first
The official explanation from Tokyo was couched in careful diplomatic language.
“It was found that there are points that need to be discussed at the administrative level during coordination with the American side. Therefore, the trip has been cancelled,” government spokesperson Yoshimasa Hayashi told reporters.
But beneath the surface, a high-stakes game of chicken is unfolding. At the heart of the dispute is the sequencing of the deal.
Japan has made it clear it wants an amended presidential executive order from Donald Trump to remove punishing, overlapping tariffs before it releases a joint document formalizing the details of its $550 billion investment.
“We are strongly requesting that measures be taken to amend the presidential order concerning mutual tariffs as soon as possible, and to issue a presidential order to reduce tariffs on auto parts,” Hayashi added, a clear and public demand for Washington to make the first move.
This standoff is further complicated by a fundamental disagreement over the deal’s spoils.
While President Trump has touted the package as “our money to invest” and claimed the US would retain 90 percent of the profits, Japanese officials have consistently stressed that any investment will be contingent on whether it also benefits Japan.
The price of delay: an economy already feeling the pain
This diplomatic impasse is not happening in a vacuum; it is unfolding as Japan’s economy is already feeling the acute pain of the existing tariff regime.
The nation’s exports posted their biggest monthly drop in four years in July, a slide driven by a sharp slump in shipments to the United States.
The damage has been so significant that Japan was recently forced to slash its annual growth outlook from 1.2 percent to just 0.7 percent.
The cancellation of the talks prolongs this economic uncertainty.
While a government source familiar with the negotiations suggested that the negotiator, Ryosei Akazawa, could head to Washington as early as next week if the issues are resolved, the message from Tokyo is clear.
The ball is now firmly in Washington’s court, and a landmark deal that was once seen as a certainty now hangs precariously in the balance.
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