Tedious US-Japan trade talks highlight difficulty for any deals

The trade talks between the US and Japan were the first real test of Trump’s appetite to strike a compromise in this tariffs war. In fact, it was supposed to be one of the easiest battles to settle. In the aftermath, he touted “big progress” in the talks in Washington but the Japanese camp was less upbeat. It wouldn’t be the first time though that we got a contrast in views on the situation, as led by Trump’s history.

And over the weekend, the contrast became even more stark when Japan ruled out a quick deal here. And what is being reported is that Japan is asking the US what it wants during negotiations, and the latter can’t even respond fruitfully on that front.

This just reaffirms what former assistant secretary of defense, Chas Freeman, had to say over the weekend:

“The Japanese have just been in Washington. Their experience apparently was they went to talk to the American leadership on this matter, and the American leadership said “what are you offering?”. And the Japanese said “well, what is it that you want?”. And the Americans could not explain what they wanted. This is a cockamamie approach to negotiation.”

Freeman goes on to warn that China has definitely picked up on that and it could spell trouble for the rest of the world if the Chinese were to just hunker down and ride out the storm.

“What is China’s incentive to negotiate with the US when the US has no stated objectives that make sense and no record of compliance with its own agreements? I think the Chinese have decided they will wait us out and see how Americans like Walmart and Amazon denuded of products.”

It’s a bad omen for the world economy and broader markets if this reckless approach to trade negotiations keep up. As things stand, there’s already going to be damage but the extent of it remains uncertain. But if this is what we’re dealing with, then 90 days definitely won’t suffice in getting any positive outcomes.

If even Japan is struggling to get something out of talks with the US, what else more difficult parties like the EU and China? That is if we even get there at this stage in the near future.

There’s still time to course correct from all this but that will require Trump to drop more of his ego. For now, it’s unlikely but that is the best that markets can hope for. Otherwise, the alternative is to let all this carnage play out and that’s not a pretty sight to behold over the next few months at least.