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Quote of the Day: “appeasement tactics [with the US President] aren’t really working… countermeasures may work better.””–Takuji Okubo, Japan Macro Advisors

2018-05-18

From an NYT article about Japan-US trade relations: the Japanese are considering retaliatory tariffs against US products.  They are not interested in bilateral trade talks but prefer that the US rejoin the Trans-Pacific Partnership talks with 11 countries– an attempt to create a free-trade zone that competes with China.  Japan exports specialized steel parts to the US that are not available elsewhere, so it is likely that US companies will have to pay the tariffs; if not, this steel is a small fraction of Japanese exports and can be sacrificed.  Japan exports very little aluminum.  Thus, Japan has little to lose by refusing to engage in bilateral trade talks with the US.

Today, “Japan notified the World Trade Organization that it was reserving the right to impose retaliatory tariffs against the United States in response to tariffs on steel and aluminum imports proposed by President Trump.”

Japanese Prime Minister Abe had tried to cultivate a personal relationship with Mr. Trump but was said to be disappointed with the “cool, even cold” way he was treated.  Trump has repeatedly stated that he wants a bilateral trade agreement with Japan, but Mr. Abe has politely and firmly declined.

The last time the US under GW Bush applied tariffs to Japanese steel, Japan complained to the World Trade Organization and eventually was vindicated– but it took three years.  The Japanese appear to be willing to wait for a judgement.

Unfortunately, Mr. Trump withdrew from the Trans-Pacific Partnership in the first week after he was inaugurated, so the chances of negotiating a multilateral agreement under his regime appear to be slim to nil– especially since Trump brought Mr. John Bolton into his administration.

President Trump’s concept of trade relations with other countries is primitive and he does not seem to understand the significance of the balance of trade between countries.  He seems to think that a deficit in the balance of trade between two countries represents a loss– a retrogression to mercantilism, an obsolete concept of foreign trade that was the excuse for colonialism and imperialism.  The damage done to US relations with other countries will be hard to reverse when Mr. Trump leaves office; we hope that more competent “globalists” will supplant him, but anything could happen.

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