Trump Tariff Hits Japanese Business and Politics

The President of the United States, Donald Trump, announced introduction of “reciprocal” tariff on April 2nd, which would be imposed on goods imported from foreign countries with respectively different rate for each country. He declared that 24 percent of tariff rate would be applied to the goods from Japan, arguing that Japan had been levying high tariff on US goods. The government of Japan has not found what measures it would take to counter the Trump’s tariffs.

In his address at the Rose Garden, White House, Trump argued that the US had been ripped off by foreign countries. “For decades, the United States slashed our trade barriers on other countries while those nations placed massive tariffs on our products and created outrageous non-monetary barriers to decimate our industries,” said Trump. He called it “liberation day” to make America wealthy again.

 

The rate of tariff on Japan was higher than the prediction of the policymakers in Japan. Prime Minister Shigeru Ishiba immediately announced that Trump’s tariff policy was “extremely regrettable.” Economists calculate that the policy would reduce Japan’s gross domestic products by 0.5 to 0.6 percent. On April 2nd, Nikkei 225 marked significant decline of 989 yen (3 percent) from the previous day, settled at 34,735 yen. It was the first time in these eight months for the index to sink below 35,000 yen.

 

It is inevitable for exporters in Japan to be affected by new Trump tariffs on their products. Total export from Japan to US in 2024 was 21.29 trillion yen with increase of 5.1 percent from the previous year. Export to the US occupies 20 percent of all exports of Japan. The goods that have most share in export to the US was cars, which amounted 6 trillion yen, followed by car parts with 1.2 trillion yen. The 25 percent tariffs on cars and their parts, taken effect on April 2nd, were also a significant blow to Japanese carmakers.

 

Some business leaders hope Japanese government support for their business. While some companies have built their factories in the countries in Southeast Asia, such as Thai or Vietnam, Trump’s tariffs hit those products of Japanese companies, because those countries are also included in the list of targets. Ishiba is considering some measures to maintain Japanese economy, possibly with supplemental budget, if necessary.

 

Ishiba described that situation against Japanese industries as “national crisis” in a discussion at the Diet. He convened a meeting with six party leaders to ask cooperation in dealing with the Trump’s tariffs. “This is the issue with which we need to deal altogether,” said Ishiba. Japan has been asking Trump administration to be excluded from the target. Ishiba insisted that he would like to have a meeting with Trump to negotiate.

 

The head of Constitutional Democratic Party of Japan, Yoshihiko Noda, requested Ishiba to establish an inter-ministry team to deal with the issue. The leader of Democratic Party for the People, Yuichiro Tamaki, insisted that the government should accept his policies such as raising threshold of income tax, tax reduction for gasoline and discount of electricity supply.

 

It is undeniable that Ishiba tries to take this opportunity to lead the opposition parties into a political truce. Trump’s tariff policy may not be more than another issue for political struggle between the parties in Japan.

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