Japan, the world’s third largest economy and the U.S.’s fifth largest trading partner, reported that its economy had contracted in the third quarter for the first time in more than a year. The New York Times reports the decline of 1.8% on an annualized basis came as tariffs imposed by the administration of Donald Trump began to weigh on exports, which fell 1.2%, driven by a slump in automobile and parts shipments, a sector “acutely affected” by higher U.S. duties.
Japan reached a trade agreement with the U.S. in July, reducing the blanket tariff on Japanese imports to 15%, from an initial 25%, in exchange for a commitment to invest $550 billion in the U.S. economy.
Meanwhile, the Wall Street Journal reported that the economy of Switzerland had shrunk for the first time in two years, with GDP falling 0.5% in Q3, also as tariffs on U.S. imports began to bite. Switzerland announced November 14 that it had reached a trade deal with Trump that reduced the import tax on many Swiss goods from 39% to 15%.
Read More: Trump Tweaks Tariffs, More Concessions May Be Coming
The Times said that another drag on Japan’s overall economic performance has been private consumer spending, which has struggled amid persistent high prices for basic items such as food and energy. Private consumption was roughly flat in the July to September quarter, up 0.1% from the previous year.
The U.S. Supreme Court began hearing a legal challenge to the tariffs on November 5, following a late-May ruling from the U.S. Court of International Trade, which asserted that the president had overstepped his executive authority by declaring emergencies over trade deficits and drug trafficking to unilaterally impose tariffs. There is as yet no word as to when the court will issue a ruling.
AloJapan.com