Trump targets Japan to set stage for global trade wars

In a recent article, Foreign Policy highlights that the Trump administration's trade strategy focused heavily on Japan, aiming to set a firm tone for future, more challenging negotiations. The US viewed Japan as a key player, already influenced by Washington, but the seasoned bureaucrats of Japan, with decades of experience in trade disputes, have proven to be formidable opponents.

In the early stages of the talks, President Trump imposed 24 per cent punitive tariffs on Japan, particularly targeting its critical auto sector, which also faced an additional 25 per cent tariff. However, US officials have left unclear how these tariffs would work in tandem. Japanese Prime Minister Shigeru Ishiba described the situation as a "national crisis" in April, expressing Japan's efforts to mitigate the impact, aligning with Trump's earlier claims of overwhelming global eagerness to strike deals.

One issue that baffled Japanese officials was the 24 per cent tariff figure, which appeared to be based on a formula unrelated to actual tariff rates. "Why didn’t they check the World Trade Organisation’s website?" remarked a former senior trade official, pointing to Japan's actual tariff rate of just 2 to 4 per cent. This confusion highlights the challenges in the negotiation process.

Despite these complications, the US has an edge, given Japan’s $68.5 billion trade surplus with the US in 2024, as well as a weakened yen, which provides Japan with flexibility. But Japan's leverage is also significant—it is the largest foreign holder of US Treasury securities, which could become a critical factor in future negotiations.

The talks are expected to lead to a "win-win" outcome, with possibilities such as increased rice imports to Japan or an agreement to address inflation. Although the trade dispute presents challenges, analysts believe a deal is likely, as both sides have too much to lose for negotiations to fail.

By Naila Huseynova