Trump’s tariffs push Japan to rethink its global trade strategy Opinion by Foreign Affairs

The Trump administration’s aggressive tariff policies have forced a global wake-up call, exposing vulnerabilities in countries heavily reliant on the US market — none more so than Japan. With steel, aluminium, and automobile tariffs soaring up to 50 per cent, Japan faces a looming economic threat that demands a swift, strategic response beyond simply waiting for US legal or political shifts, Foreign Affairs analyses.

Since 2018, President Donald Trump’s administration has imposed a series of tariffs targeting key trading partners, starting with Canada, China, and Mexico, then expanding to a sweeping 25 per cent tariff on steel and aluminium (recently raised to 50 per cent), and 25 per cent on autos and parts. A “reciprocal tariff” scheme threatened to hit imports from all countries with a 10 per cent base rate plus country-specific add-ons, though this has been paused amid legal challenges.

Japan’s economy, deeply export-driven, counts the United States as its second-largest market, responsible for about 20 per cent of exports. Automobiles and parts alone make up over a third of those exports, making them particularly vulnerable. With tariffs this steep, many Japanese products risk becoming prohibitively expensive for US consumers, potentially driving down Japanese corporate profits by an estimated seven percent in 2025–26 after years of steady growth.

The damage isn’t limited to tariffs alone. Tokyo and other trading partners have lost confidence in the stability and openness of the US market. Multilateral trade institutions have weakened under Trump, complicating efforts to enforce trade rules and build reliable supply chains—especially for critical minerals and clean energy, where dependence on China remains a serious concern.

Diversifying beyond US

Japan can no longer afford to rely so heavily on Washington. Instead, it must leverage its global economic weight and resources to diversify trade and strengthen multilateral trade systems — with or without the United States.

First, Japan should deepen trade relations beyond America, targeting emerging markets in India, Africa, Latin America, and the Middle East. Diplomatic visits and business promotion events can open doors where ties have been weak. Repairing ties with China is equally vital; recent agreements to resume marine product imports highlight that political and economic cooperation can be revived.

Building on the Regional Comprehensive Economic Partnership (RCEP), which encompasses Japan, China, South Korea, ASEAN countries, and others, Japan should push for accelerated tariff reductions using a flexible formula approach that respects each member’s sensitivities. This could speed market diversification and trade expansion across roughly 30 per cent of the world’s GDP.

Beyond Asia, Japan should pursue trade deals with Latin America’s Mercosur bloc and the Gulf Cooperation Council, tapping into their growing markets and rising living standards.

Strengthening global trade system

Trump’s trade actions have further undermined the World Trade Organization (WTO), especially by blocking appointments to its dispute resolution appellate body and stretching “national security” exceptions. Yet the WTO remains essential for global trade stability. Japan and like-minded nations must find ways to sustain and improve the WTO system, even if the United States remains absent for now.

An alternative dispute mechanism — the Multi-Party Interim Appeal Arbitration Arrangement — already includes Japan, China, Canada, and the EU, with more large economies encouraged to join. Meanwhile, new WTO rules on e-commerce and investment facilitation show promise for incremental progress.

Complementing these efforts, Japan can strengthen the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a high-standard trade pact Japan helped lead after the US withdrawal. CPTPP offers deeper liberalisation and robust rules, and its expansion to include countries like the UK and potentially others in Europe and Asia could create a powerful counterweight to the WTO’s weakening role.

According to the article, Japan must also collaborate with partners across Asia, Africa, Latin America, and beyond to develop secure supply chains for critical minerals and clean energy technologies. US tariffs threaten to derail existing multilateral supply initiatives, but Japan’s ongoing efforts with Australia and India to source rare earths are a promising start.

Future beyond tariffs

The door remains open for the US to rejoin multilateral efforts, but counting on that is no longer a viable strategy. Japan and other nations must mitigate tariff damage by diversifying trade, strengthening global trade rules, and building resilient supply chains. If successful, these efforts could demonstrate the value of cooperation and persuade future US leadership to reengage—benefiting Japan, the world, and the United States alike.

By Sabina Mammadli