'Art of the Stupid Deal': Trump's Japan Trade Pact Bashed by Automakers, Unions, Economists

President Donald Trump this week announced that he had cut a deal with Japan that would lower tariffs on Japanese cars to 15%, which was a cut from the 25% tariffs that he'd originally placed on them.

However, many of the parties whom Trump claimed he was trying to help are not happy with the deal, including major automakers and unions representing hundreds of thousands of workers.

Matt Blunt, president of the American Automotive Policy Council that represents America's "Big Three" automakers, told The Associated Press this week that the deal Trump struck with Japan leaves U.S. automakers "at a disadvantage" compared to their Japanese competitors given that "this is a deal that will charge lower tariffs on Japanese autos with no U.S. content."

The United Autoworkers (UAW) similarly blasted the deal, saying it makes clear that "American workers are once again being left behind."

"This deal hands a win to transnational automakers that rely on low-road labor practices: Substandard wages, excessive temps, and union-busting," said UAW in a press statement. "Now, those same companies stand to benefit from lower tariffs, while unionized automakers—who could quickly create tens of thousands of good jobs using existing capacity—are left with fewer incentives to do so. Once again, American workers are being forced to suffer the consequences."

As Nobel Prize-winning economist Paul Krugman explained on his Substack page on Friday, these stakeholders have good reason to feel burned by what he calls Trump's "art of the stupid deal."

In the first place, the current arrangement leaves in place 25% tariffs on car components produced in Canada and Mexico, both of which are vital parts of the American manufacturing chain. Trump has also left in place 50% tariffs on foreign steel and aluminum, which will further drive up U.S. automakers' input costs and leave them at a disadvantage with Japanese competitors who can still access foreign steel and aluminum at much cheaper prices.

"Overall, the interaction between this Japan deal and Trump's other tariffs probably tilts the playing field between U.S. and Japanese producers of cars, and perhaps other products, in Japan's favor," Krugman explained. "If this sounds incredibly stupid, that's because it is."

Krugman then speculated that "Trump's negotiators probably had no idea what they were doing, and didn't realize that in their frantic rush to conclude a deal they were agreeing to tariffs that would be highly unfavorable to U.S. manufacturing." He added that negotiators were under so much pressure due to the ridicule he's faced for "having made big promises about his ability to negotiate trade deals, then coming up empty month after month."

University of Michigan economist Justin Wolfers appeared on MSNBC earlier this week and outlined why Trump's Japan deal was still a net loss for American consumers even though Trump was lowering the earlier tariffs he had set on Japanese cars.

"If you began by saying that [the] tariff on Japan has gone from 25% to 15%, it would feel like he'd negotiated a great deal," Wolfers said. "That's not what happened here."

He then explained that tariffs on Japanese goods before Trump took office were just 2%, which means that "the biggest thing Trump has done is he's raised taxes on Americans who import goods from Japan from 2% to 15%."