Japanese Prime Minister Shinzo Abe, fresh from winning a third term as premier, is expected to walk a fine line when he meets President Donald Trump next week as Tokyo looks to avoid a trade war with the U.S.
Earlier this month, Trump indicated he could impose a 25 percent duty on imports of Japanese vehicles and automotive parts as part of a strategy to reduce U.S. trade deficits with the international community. The move is widely seen as a bargaining tool for Washington to get what it has long sought from Tokyo — a free trade agreement.
However, the world's third largest economy is opposed to a bilateral trade deal and must find other ways to appease Trump, strategists told CNBC.
"I don't think there's any reason not to take [Trump] seriously," said Tobias Harris, vice president at Teneo Intelligence: "So now, Japan has to entertain either some pretty serious market access concessions or enter FTA talks — both things that Japan has tried to avoid since Trump took office."
The matter is expected to dominate Abe's summit with Trump which is slated for Sept. 26 in New York.
The tariffs are considered economically damaging for the Asian giant since passenger cars make up around 30 percent of Japanese exports headed stateside. It's also politically embarrassing for Abe, who has presented himself as someone with close ties to Trump, Harris explained.
If Trump acts on his threats, Abe will find himself in a situation where he has to retaliate with similar measures and that could derail the broader bilateral relationship, said Harris. That's currently the case with Beijing, which has responded to Trump's trade penalties with tit-for-tat measures.
"That situation is obviously something Abe wants to avoid," Harris stated.