US President Donald Trump on Wednesday announced that the initial stage of a new trade deal with Japan had been finalised, describing it as a “phenomenal” agreement.

Sitting next to Prime Minister Shinzo Abe, Trump said the leaders “formally announce the first stage of a phenomenal new trade agreement,” adding “this is a big chunk, but in the fairly near future we are going to have a lot more.”

Trump, using the threat of tariffs, has sought a comprehensive trade deal to scale back the US trade deficit with Japan and to benefit American farmers — a key base of political support.

Trump said that a trade agreement would be important to “reduce our chronic trade deficit.”

It would open new markets to “some US$7 billion” in American products, he said, adding that US tariffs on Japanese goods would drop in return.

He said he hoped to sign a “very comprehensive deal” with Japan soon that means “really big dollars for our farmers and for our ranchers.”

“We are working on phase II already,” he added.

As Trump and Abe met on the side of the UN General Assembly in New York, the Japanese prime minister said a deal would be “a win-win solution for Japan and the United States.”

Hanging over the negotiations has been Trump’s November 17 deadline to decide whether to go ahead with stiff punitive duties on car imports from Japan, as well as from the European Union.

Last year, the total US trade deficit with Japan was US$58 billion, and Japan exported US$51 billion worth of cars to the American market, according to government data.

American farmers and ranchers are eager for a trade deal as they are highly dependent on export markets.

Japan is the US’s third largest agricultural export market, and Japanese consumers bought a quarter of American beef and pork exports last year — US$1.6 billion in pork and more than US$2 billion worth of US beef. (AFP)