Japan and other major exporters face a Trump-tariffs trade war

This year, 2024, has been a good one for Japanese business, with profits strong and the Tokyo stock market finally returning to its peak level from way back in 1989-90. However, if President-elect Donald Trump carries out the promises that helped him win re-election, next year, 2025, is looking likely to be a lot less comfortable, at least for exporters in Japan and other trade-surplus countries. The key questions concern how uncomfortable it will become, and what businesses can do about it.

Throughout his campaign, Trump promised to impose at least a 10% tariff on all goods imported from abroad, and sometimes threatened to make the tariff 20%. As average US import tariffs are now less than 2%, this would represent a big increase. Some argue that American businesses might successfully lobby him to reduce or delay these tariffs. But this looks very unlikely. As this second term will be his final period in office under the US Constitution, he no longer needs businessmen’s support.

Robert Lighthizer, his close advisor who was US Trade Representative during the 2017-20 Trump administration, published an opinion article in the Financial Times on November 1 justifying Trump’s proposed trade policies by blaming those foreign countries that had for years run surpluses in their trade with the United States. Obviously, that includes Japan, a country he battled against as deputy US trade representative under President Ronald Reagan in the 1980s. He wouldn’t have published that article if Trump had not authorized him to do so. And Trump on Tuesday picked Lighthizer’s former chief of staff and protege Jamieson Greer for the USTR job in the new term.

It is therefore highly predictable that this tariff will be imposed, probably quite