Trump, Trade, and the U.S.-Japan Relationship: What You Need to Know

May 30, 2019 - Ethan Segal, Professor of History

President Donald Trump recently returned from an official trip to Japan, where he met with Prime Minister Abe and the country’s new emperor. Much like in his diplomatic efforts with China, Mexico and other countries, the president’s attention was focused on trade.  He has long decried the United States’ trade deficit with Japan and threatened new tariffs on Japanese cars. But what exactly was accomplished during the president’s visit?  How has trade impacted U.S.-Japan relations?  And what issues can we expect to resurface as relations and negotiations continue to evolve?

Though the news on both sides of the Pacific have described Trump’s visit as accomplishing little, each government was successful in realizing some goals that it deemed important.  For example, Trump persuaded the Japanese to purchase 105 Lockheed F-35 war planes, which will lessen the trade deficit while supporting the president’s mission to sell American arms overseas.  Trump also talked “tough” on trade, asserting that he expects the U.S.-Japan trade balance to get “straightened out” as soon as August – which will surely appeal to his supporters back in the U.S.

For Japan, the president’s visit was an opportunity to highlight the strong relationship between the two countries.  Trump and his wife Melania were the first foreign dignitaries welcomed by the new Emperor Naruhito and his wife Masako. Trump also joined Japanese Prime Minister Abe in meeting with Japanese families that had loved ones kidnapped by North Korean agents. The sale of U.S. military planes to Japan further solidified the countries’ alliance against regional rivals such as North Korea and China.  And as for trade, Abe was surely relieved that Trump agreed to delay further trade talks until after Japan’s upper house elections in July.

Trade has been a contentious issue in the U.S.-Japan relationship for decades.  Following Japan’s defeat in World War II, postwar leaders chose to make economic growth the country’s top priority.  Working under a new constitution written by the United States that kept the Japanese from re-arming and established a defensive security treaty, the country focused on becoming an economic superpower by the 1980s. 

Many in the United States - especially here in Michigan – are familiar with the tensions over Japanese automobiles that threatened the U.S.-Japan relationship. The hostility was so rampant that it even led to the murder of Vincent Chin, a Chinese-American man brutally attacked by two white auto workers in Detroit who falsely assumed he was Japanese.

Although friction with Japan has lessened since the 1980s, the U.S. still has a significant trade deficit with Japan.  According to the U.S. Trade Representative, we exported $120.4 billion in goods and services to Japan in 2018 while importing $177.1 billion – a deficit of almost $57 billion. 

The issue of the trade deficit, however, is deeper than these figures imply. For example, according to the same office, Japan’s foreign direct investment in the United States was $496 billion in 2017 – more than 3.5 times as much as American foreign direct investment in Japan.  Many Japanese cars are now built in the United States by American workers: Hondas in Ohio, Toyotas in Kentucky, parts for both here in Michigan.  Furthermore, Japan is one of the largest foreign holders of U.S. debt. What does this all mean? Put simply, the U.S.-Japan trade relationship is not as one-sided as Trump suggests.

Moving forward, Prime Minister Abe hopes to win support for changing Japan’s constitution so that the country will have a “normal” military. Aggressive actions by China and North Korea only serve to make his case easier.  Meanwhile, Trump seems certain to revisit the U.S. trade deficit with Japan as well as continue criticizing China as he heads into the upcoming election year.  Let’s hope that his focus on the election does not keep him from recognizing the value of a strong U.S.-Japan relationship.