U.S. President Donald Trump is discovering that threats and bluster are not a strategy and that the realities of an interconnected world are more complex than he imagined. The latest learning curve is in trade, where conflicting objectives vex a president determined to balance U.S. trade accounts. Trump has delayed again the imposition of unilateral tariffs against some trade partners of the United States as his administration attempts to avoid a trade war and maintain a united front in the battle against China’s predatory economic policies. Japan has been whipsawed by the conflicting U.S. objectives.
Convinced that the U.S. has been exploited by its trade partners and this is the source of its economic woes, Trump has demanded unilateral action to remedy its trade imbalances. His policy is based on a flawed understanding of economics and a desire to look strong — sanctions are something the president can do, a crucial factor for someone determined to be seen as decisive.
He thus decided two months ago to impose tariffs on U.S. imports of steel and aluminum, a move that was ostensibly based on national security considerations, although it is difficult if not impossible to understand the threat posed by imports from U.S. allies. The tariffs were not put in place immediately, however: The administration said that it would discuss with governments alternative means of addressing its concerns, holding out the prospect of voluntary restraints to achieve those aims.
Trump thought that threats would give him leverage to impose quotas or renegotiate trade deals in ways that he prefers; he did not anticipate or take seriously the prospect of retaliation against U.S. exports. That was a mistake. Only South Korea agreed to cap its exports, a move that won Seoul a permanent exemption from the tariffs. Reportedly, Argentina, Brazil and Australia, three other U.S. trade partners, are close to final deals on voluntary restraints. The European Union countered with a list of its own sanctions targets, however, and insisted that it would only negotiate with Washington when the U.S. ends its threats.
In the absence of progress, the U.S. government decided last week to extend by one more month the deadline to reach agreement on export limits. Apparently, the president still hopes that he can use threats to “fix” the North America Free Trade Agreement that he despises, bring the Europeans around and get Japan to open negotiations on a bilateral trade deal.
Instead, the delay makes Trump look weak and allows U.S. constituencies that would be the targets of retaliation to become more vocal in their opposition to his policies. Finally, and most worrying, he is discovering that threats undermine consensus among the U.S., Japan and Europe that the most dangerous threats to the global economic order are posed by Chinese policies.
While many countries have benefited from China’s explosive economic growth, there is a growing sense that China has been exploiting holes in the global trading system to enact policies that privilege its own companies and disadvantage foreign competitors. In keeping with its unilateral inclinations, in April, the Trump administration announced that it would impose sanctions on Chinese exports to the U.S. China responded with a list of its own, and the two governments appear determined to stare each other down, if not proceed to a trade war. Last week, the U.S. dispatched a high-level delegation to Beijing to press an imposing list of demands, the two most notable of which were a $200 billion reduction in the trade imbalance with the U.S. and the end to the Made in China 2025 plan to promote development of indigenous technologies. The U.S. position has been equated with those of the 19th century. Not surprisingly, the talks made no progress and the delegation, despite the presence of several Cabinet officials, did not meet with President Xi Jinping.
The only way that the U.S. can check Chinese policies is by mustering support from other governments and presenting a united front. Instead, Trump’s unilateralism allows Beijing to rally other governments to its side in defense of the multilateral trade order.
Japan’s position throughout this process has been tenuous and conflicted. Trump seems ready to disregard our military alliance and our shared diplomatic aims because of a mistaken belief that Japan used trade to beggar the U.S. in the 1980s. He is determined to force the Japanese government to open negotiations on a bilateral trade agreement. While Japan could back efforts to constrain China’s predatory behavior, unilateral U.S. policies that seek to punish China will do great harm to Japanese companies whose supply chains run through the mainland. Japan has rightly fended off U.S. demands to open bilateral negotiations and has filled the leadership vacuum Washington created by withdrawing from the Trans-Pacific Partnership. That sober and deliberate approach must be maintained.
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