President Donald Trump has rapidly increased American tariffs to levels not seen since the last century.
He has used tariffs to punish the United States’ largest trading partners (Mexico, Canada, and China) for non-trade offenses, targeted key industrial sectors such as steel and automobiles, and rolled out a universal 10% tariff to cover all imports into the United States along with hefty ‘reciprocal tariffs’ on close to 60 economies.
After a series of retaliatory measures and financial market turmoil, the U.S. tariff on China now stands at 145%.
This wave of tariffs has left Japan shaken.
Prime Minister Shigeru Ishiba’s proposals for brisk Japanese investments and new U.S. manufacturing jobs have not spared Japan from the 25% auto and metal tariffs or the steep 24% ‘reciprocal duty’ on all Japanese exports, despite Trump temporarily suspending all U.S. ‘reciprocal tariffs’ for 90 days.
Japanese officials sent to Washington in search of tariff exemptions returned empty-handed.
As the severity of the tariffs became evident, Japan’s economic outlook darkened significantly.
Some estimates suggest that Trump’s tariffs could cost Japan 0.8% of its economic growth, while the Nikkei index dropped by nearly 9% in a single day on April 7.
In response, Japanese leaders are scrambling to find solutions.
Ishiba has correctly dubbed Trump’s tariff actions a ‘national crisis’.
He has made initial moves to address the situation by convening leaders from opposition parties to forge a political consensus, establishing a task force to assist small firms needing real-time information on tariff impacts, and initiating negotiations with the United States.
During a phone call, Trump and Ishiba agreed to set up cabinet-level negotiations.
Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will represent the U.S., while Economic and Fiscal Policy Minister Ryosei Akizawa, a close ally of Ishiba, will represent Japan.
Tokyo is likely feeling a sense of relief that Japan has received priority in its trade negotiations with the Trump administration.
The stock market rallied on news that punitive tariffs may be subject to negotiation.
However, these tactical measures may prove insufficient for adapting to the world’s largest economy’s departure from the free trade system.
A long-term strategy is needed, encompassing at least four key approaches.
First, it is crucial for Japan to factor in the Trump administration’s ‘economics first’ approach.
Trump’s chaotic trade strategy can be understood as a peculiar blend of victimhood and hegemonic arrogance.
When Trump and his closest advisors discuss U.S. trade relations, it conveys a narrative of victimization, with claims of cheating and exploitation by others, and trade deficits used as undeniable evidence.
This perspective overlooks that the United States remains the largest, most prosperous, and most technologically advanced nation globally.
These national strengths provide Trump’s tariffs with leverage: he can manipulate others’ dependence on America’s market, capital, and security guarantees to impose new terms.
Trump operates as an ‘economics first’ president, with trade being a top priority for his administration.
Interestingly, his approach to complex security crises also often relates back to economic considerations.
For example, a minerals agreement with Ukraine was originally framed to provide Trump with economic incentives to support a nation facing invasion.
Moreover, Trump’s national security team has suggested that Europeans should bear the costs for U.S. efforts to secure shipping lanes in the Red Sea.
Stephen Miran, chair of the Council of Economic Advisors, has stated clearly that the U.S. expects to receive payment for providing public goods like a reserve currency and local security support.
These payments could take the form of higher tariffs or checks sent to the U.S. Treasury.
As such, the MAGA project aims to extract economic advantages from global interactions, not to establish conventional spheres of influence.
Second, Japan must set realistic expectations regarding potential outcomes from negotiations.
As Japan embarks on negotiations with the United States, it should be cautious of the fact that trade agreements reached with Trump may have limited longevity.
Trump has been known to disregard the terms of previous trade agreements, such as those negotiated during his first term, including the U.S.-Mexico-Canada Agreement and the U.S.-Japan trade accords, by implementing unilateral tariffs.
Therefore, Japan should view these current negotiations as a damage reduction exercise rather than a pathway to stable, lasting agreements.
For Trump, these negotiations do not necessarily result in commitments that are binding.
It would be prudent for Japan to temper aspirations about the results achievable at the negotiation table.
While the Trump administration has not clearly defined which tariffs are negotiable, it is possible that universal tariffs may not be up for discussion, as granting exemptions would contradict the principle of their universality.
Furthermore, the method used by the Trump administration to calculate ‘reciprocal’ tariffs is devoid of economic rationale; it merely examines the goods trade deficit relative to U.S. imports.
This method can lead to inflated tariff rates.
Japan could be entering negotiations where they ‘pay’ to lower ‘reciprocal’ tariffs through unilateral concessions that extend beyond trade issues—potentially into currency policies or defense costs—without gaining any meaningful access to U.S. markets.
Third, Japan should focus on building resilience against coercive trade practices from its ally.
In the short and medium term, the pursuit of negotiations with the United States is essential.
However, relying solely on a negotiation strategy with an unpredictable America will not be sustainable for Japan in the long term.
Instead, Tokyo should leverage the two essential assets it has developed since Trump assumed the presidency: an economic security framework and influential standing in the global trading network.
The principles of risk diversification and resilience should guide Japan’s strategy going forward.
Trump’s trade warfare has undoubtedly compromised Japan’s geoeconomic landscape and highlighted vulnerabilities as the U.S. leverages economic partnerships as tools of pressure.
To navigate future challenges, Japan should adopt the strategies of strategic autonomy and strategic indispensability outlined in its Economic Security Promotion Act.
Today, Japan has gained insights into how to manage supply chain disruptions and engage with economic coercion effectively.
While reducing reliance on China is important, it does not equate to de-risking from the United States—a far more complex challenge that entails building resilience against economic shocks originating from a critical security partner.
Japan should still aim to cultivate robust security and economic relations with the United States, but the management of risk now requires a more nuanced approach.
Consequently, capital-intensive projects (such as a liquefied natural gas pipeline in Alaska) should be analyzed not only for their potential to appease Trump during contentious trade negotiations but also for their ability to create durable dependencies in the long run.
Lastly, Japan must proactively expand its trade networks.
Tokyo should think beyond the current difficulties facing its bilateral trade relations with the United States and prioritize resuming momentum in regional and transregional trade initiatives.
Japan has a solid foundation to build upon: following the U.S. withdrawal from the Trans-Pacific Trade Agreement in 2017, it successfully rescued the agreement with the remaining 10 economies.
Subsequently, Japan negotiated the Regional Comprehensive Economic Partnership (RCEP)—which incorporates China—and finalized a comprehensive trade deal with the European Union.
However, today’s challenges present the need for new, ambitious approaches.
While the proposed Japan-South Korea-China free trade agreement could gain traction, it should meet two essential conditions: offering higher quality liberalizations than those currently available under RCEP membership, and securing a firm commitment from China to cease economically coercive practices, which is something Japan has also pushed for regarding its membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Despite promises to the contrary, China has delayed lifting its ban on imports of Japanese seafood and continues to weaponize crucial mineral supply chains.
The CPTPP should re-emerge as the cornerstone of Japan’s trade leadership.
Rather than pursuing lengthy negotiations for membership with each individual economy, Tokyo should seek the ‘big bang’ option: wooing the European Union to join.
The dynamics of cost-benefit analysis for this initiative have shifted as the world grapples with the implications of U.S. trade barriers.
This venture would not be a collective attempt to retaliate against Trump’s ‘America First’ stance through tariffs.
Instead, it would focus on establishing a broader and revitalized framework for rules-based trade—aligned with the pressing demands of the current economic climate.
image source from：https://www.brookings.edu/articles/what-must-japan-do-to-survive-trumps-global-trade-war/
