Since the beginning of the Trump Administration’s second term, there has been a lot of turmoil in the U.S.’ international relations as well, including in the U.S.-Japan relationship.
While in the earlier term of President Trump (between January 2017 and January 2021), there was great camaraderie between President Trump and the former Japanese Prime Minister Shinzo Abe, this seems to be missing in the second Trump Administration as Japanese PM Shigeru Ishiba was not among the first to meet President Trump, though Japan is the closest U.S. ally in East Asia.
Under Trump, there is no denying that Japan’s automotive sector, is reeling from a 25 percent tariff on finished automobiles and car parts. In addition, Japan has also been slapped with 24% reciprocal tariffs, though they have been paused for a while (along with those on many other countries). In the light of these tariffs on the automotive sector, leading Japanese auto manufacturers have projected a fall in revenues.
Teething Troubles
PM Shigeru Ishiba did visit Washington DC, in February this year, but that visit could not break the ice as far as the Trump-unleashed tariff war is concerned. During the final weeks of his term, the then U.S. President, Joe Biden, had blocked the proposed $15 billion acquisition bid by Japan’s largest steel producer, Nippon Steel, of U.S. Steel citing “national security concerns”. Though now President Trump has indicated that he also “opposes the deal” but at the same time, he has also indicated that he is “open to negotiation.”
There could be other problems in the bilateral ties as in Trump’s approach towards the security provided by the U.S. forces to Japan. Earlier in March 2016, Trump (as the then Republican frontrunner) had remarked that “the U.S. spends too much money protecting countries like Japan and Saudi Arabia and that they may need to go nuclear”
What Japan Could Do?
What is worrying for Japan is that since automobile exports form a major chunk of the country’s export basket, the tariffs could hit the Japanese economy very hard. However, one silver lining for the Japanese economy is that inbound tourism continues to grow as tourists are streaming in to Japan in record numbers.
Japan could actually wait till the situation gets better.
Tokyo could also increase its imports of agricultural goods from the U.S., although there is a strong farm lobby in Japan, though it has grown weaker over the years. Recently, the government has faced a severe backlash over the rising price of rice, so much so that the agriculture minister has had to resign after saying that “he had never had to buy a bag of rice”
Recently, the Government of Japan has approved a $6.3 billion spending package to “fully support” businesses and households who have been hit hard by the tariffs. As per the Chief Cabinet Secretary Yoshimasa Hayashi, “these funds will help the finances of small and medium-sized businesses and subsidize household energy cost.” In addition, the LDP-led government is not in a very good position ahead of the upper house elections in July. The government is also facing rising public anger over higher consumer prices.
Maybe Trump thinks that Ishiba does not hold a majority in the Diet and hence he could be waiting to see which way the wind is blowing in the Upper House Elections. What is very worrying is that, the American side has indicated that the 25% tariffs on the car imports are non-negotiable.
It is also worth noting here that U.S. accounts for nearly 30% of Japan's overall import bill. For Tokyo, it is more than a double whammy since it needs U.S. support from three nuclear armed neighbours in its immediate vicinity- Russia in the North, North Korea and of course, there is China, which has been sending naval ships into the waters around the Senkaku island(claimed by China as Diaoyu).
It is also clear that PM Ishiba does not enjoy a majority in the lower house of the Japanese Parliament and the situation may become worse in the aftermath of the elections for the Upper House of the Japanese Parliament.
The important thing for Tokyo would be to develop a personal connect with President Trump, which is the route many world governments have taken with respect to the U.S. President. It is worth noting here that President Trump had met with Mrs Akie Abe, wife of the assassinated former Prime Minister Shinzo Abe.
As with all things Trump, it seems that things could change in an instant. So, hence while Japan Inc. is naturally worried, things could change for the better (or for the worse). It is clear that Japan finds itself between the devil and deep blue sea when it comes to the economic tussle with the U.S. and there seems to be no easy out of the same.
Dr Borah is a Senior Research Fellow with the Japan Forum for Strategic Studies. The views expressed here are personal.
