Could Japan be Trump’s next trade war victim?

15-Jun-2019 Intellasia | NBC | 6:00 AM Print This Post

Despite Japan’s apparent warm relationship with Trump, he still wants to show voters that he is aggressively renegotiating all trade agreements.

In the frenzied exchanges of international commerce that have played for almost a year, news of Japan has been relatively quiet. But, with premier Shinzo Abe marking the first visit by a prime minster to Iran since the Islamic Revolution and as America’s fourth-largest trading partner global economists are wondering how long it could be before President Donald Trump takes aim at Japan, as he has done with China, Mexico, and the European Union.

Like many other countries, Japan has a trade imbalance with the US, buying $75 billion worth of goods in 2018 and selling $143 billion.

“I don’t see how the US doesn’t turn its guns to Japan” after NAFTA and China, said Robert Uriu, professor of political science at the University of California, Irvine. “Japan is in this terrible dilemma. They don’t trust what the US is doing, but in terms of their current options, especially with a rising China, I think they’re seeing they don’t have much of a choice, so they have to somehow placate the United States.”

Despite Japan’s apparent warm relationship with Trump, he still wants to show voters that he is aggressively renegotiating all trade agreements. (AFP)

Despite Japan’s apparent warm relationship with Trump, he still wants to show voters that he is aggressively renegotiating all trade agreements. (AFP)

The hot-and-cold history of trade between the US and Japan reaches back to the 1850s, when American whaling ships needed supplies, according to Ethan Segal, associate professor of history at Michigan State University.

Things went into an understandable retreat during the Second World War, but later, the two countries agreed to a low exchange rate that allowed Japan to sell manufactured goods to the US

“As the Cold War was beginning to manifest itself, we were very interested in having a stable ally in the South Pacific,” Segal said.

However, tensions between the two countries hit a peak in the mid 1980s, after the Japanese radically improved the quality of their manufactured goods and were making heavy inroads into such US sectors as cars and steel. Most Americans found the Japanese economic threat to be greater than the possibility of war from the Soviets, Segal said.

By 1990, Japan had strengthened into the world’s second-largest economy, exporting high-end electronics, autos, and other products.

Since then, Japan’s economy has been in a long downward slide, fueled by falling land prices that backed loans and an aging society where a decreasing base of working-age adults has to support older generations. “For the last 30 years, Japan’s growth has been nil,” said Jeffrey Bergstrand, professor of finance at Notre Dame’s Mondoza College of Business. “Japan used to be 67 percent of the US economy and now it’s about 40 percent because of its low growth relative to ours since about 1990.”

But the country remains an important trading as well as investing partner. “If you drive a Toyota, there’s a good chance it was built in Kentucky,” Segal said. “If Honda, it was probably Ohio.” And the chance that it stays clear of trade war mania is diminishing.

https://www.nbcnews.com/business/economy/could-japan-be-trump-s-next-trade-war-victim-n1016701

 


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