At the opening of this chapter, we referred to the events of May 1995, when the United States considered putting tariffs on imports of luxury cars from Japan. Specifically, on May 16, 1995, U.S. Trade Representative Mickey Kantor announced that the United States would impose trade sanctions against Japan, targeting 13 Japanese import vehicles for 100% tariffs valued at $5.9 billion annually. Those targeted vehicles included all Lexus models and several Acura and Infiniti models. To determine how U.S. interest rates reacted to this announcement, use the FRED database at: https://research.stlouisfed.org/fred2/. 

a. Search for “Interest rate on US treasury bills,” and choose the 3-Month Treasury Bill: Secondary Market Rate, and Weekly (which you will find under “other formats”). Adjust the graph to see what happened to the interest rate in the week including May 16, 1995. How does this movement in the interest rate compare with neighboring weeks?

b. What type of retaliation by the government of Japan for the proposed tariff can explain this change in interest rates?

c. About one month later, President Clinton announced that the two countries had reached an agreement, which ended the threat of the tariffs being imposed. What happened to the interest rate during the month of June?.