President Trump's Tariffs & Japan

How U.S. tariffs are affecting Japan, and Japan’s long-standing relationship with America.

Sakthi Muralikrishna | Kyodo News

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Japan and the United States have maintained a cemented friendship since the Japanese economic miracle of the 1950s. With the two nations sharing strong economic and cultural ties, Japan has long been a crucial partner of the U.S. in East Asia. However, recent reciprocal  tariffs imposed by the American government on nearly all nations have stirred controversy  among Japanese companies and consumers, inviting scrutiny from many. It is undoubted that tariffs on Japan are relatively lighter compared to certain other countries, yet they have had concerning repercussions on the Japanese economy. 

In September, tariffs on Japanese goods were brought down to a baseline of 15% from 27.5% for auto parts and a 24% reciprocal tariff. With automobile exports making up almost a third of Japanese exports to the U.S., the Japanese economy took a hit in the third quarter of this year - shrinking nearly 2% in the three-month period from July to September. These tariffs  are protectionist measures intended to safeguard American automobile manufacturing. In a  press conference, President Trump claimed that the United States could produce the needed  goods domestically without affecting the American market. However, Reuters has reported that Nissan, Toyota, and Ford have sought cooperation from Japanese suppliers on tariff costs. This, alongside various other American manufacturers’ woes, brings Trump’s  protectionist policies under scrutiny. 

Along with the tariff cut, Japan has vowed to invest US$550 billion in U.S. projects, and  Trump claims Japan has pledged to purchase more rice and other agricultural products. While  this order has lightened the load on Japan, it appears that the deal is tilted in America’s favour. Furthermore, following Prime Minister Sanae Takaichi’s warning in November that a  Chinese attack on Taiwan would pose an “existential threat” to Japan and that Tokyo may have to respond with military force, Beijing reacted with anger - ramping up anti-Japanese  rhetoric and sentiment throughout the country while imposing a ban on Japanese seafood imports in retaliation. 

In another shock, rather than rallying behind their usual partner Japan, the United States urged Ms. Takaichi to tone down her remarks over concerns that Taiwan-related issues would  affect U.S. trade talks with Beijing. 

Consumers have also taken a hit, with Japanese bond yields at their highest level and the yen at its lowest since 1986. The Bank of Japan has been under pressure to raise interest rates.  This has made the trade war all the more precarious for the Japanese people—with Prime Minister Takaichi vowing to spend 2% of the national budget on defence, and with rising concerns over employment and housing in the nation, tariffs have certainly made the burden of the cost of living heavier on Japanese citizens. 

Japanese companies are also in outcry, with affiliates of at least nine Japanese firms - including Toyota Tsusho Corp. and Sumitomo Chemical Co. - suing the U.S. government for full refunds of this year’s additional tariffs after the Supreme Court ruled the levies unlawful.  However, it seems unlikely that the Japanese firms will receive their money back - again striking a blow at Japanese-American economic relations. 

Japan now treads a fine line between the two giants that are China and America, with both Japanese and American consumers and companies bearing the brunt of price hikes on both raw materials and finished goods. Japan has long remained a partner of the United States in the Asia-Pacific region, but Trump’s policies have begun to hurt its trusted ally. Japan now stands further than ever from America, and with a worse relationship with China than in years prior. This may also push Japanese industries to seek other resolutions, making them less  dependent on trade with America and China.

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