The people of America have spoken, and their collective voice has delivered the presidency to Donald Trump. Never mind the global implications, what does this mean for Japan?
First, the economics. For starters, the Trans-Pacific Partnership as we knew it is officially dead. Not only did the already-slim possibility of getting it passed in the lame duck session of the US Congress vanish, but there is no way that it can be renegotiated with a president who won over rust belt voters by casting an evil eye at NAFTA during the election campaign. That said, the economic benefits that Japan will have to forego as the direct consequence of the lack of a free trade agreement with the United States are not that large.
It would be nice to have those automobile tariffs removed, but “Japanese” automakers and suppliers already have major R&D and manufacturing operations in the US as well as its NAFTA partners Mexico and Canada (fingers crossed). Indeed, the hit that Japanese exporters will take on what is sure to be run-up of the yen against the US dollar is likely to be larger than the now largely hypothetical benefits to automakers from TPP.
Now, I just said “largely,” and what do I mean by that? Well, Prime Minister Shinzo Abe could get imaginative and offer the same deals to the remaining parties to the TPP negotiations. The benefits to all parties will be smaller, particularly since Japan long ago dropped tariffs on most non-agricultural manufactured products. And the geopolitical angle of the US “Asia Pivot” will be lost altogether.
Still, it’s better than nothing, and the costs (as defined by vested interests, not economists) will be smaller too. Most importantly, it will help keep the free trade momentum alive in the Asia-Pacific area. Let’s say that Japan could try to be a bigger fish in a smaller ocean. My guess is that Prime Minister Abe won’t go there, but it is worth putting on the table.
There is also the trade friction angle. I am not really worried about Trump’s basic mindset on trade with Japan, which seems to be trapped in the trade friction days of the 1980s and 1990s. But I am a little worried about what he will do regarding China. We are likely to see anti-dumping and countervailing duties being brought against steel and other Chinese products, and Japanese manufacturers will also be carried along to buy this riptide. But this is not a game changer for Japan.
Next, security and diplomacy. Trump claims that Japan is not pulling its weight. Specifically, he has a problem with the fact that the United States is obligated to defend Japan against an attack but Japan does not have to reciprocate. From what can be gleaned from his previous statements, Japan must pay up, or build its own nuclear arsenal, if it must. Actually, Japan does pay up—close to 200 billion yen annually just for the upkeep of the US military in Japan, plus several more hundred billion yen as rent, block grants to local governments and so on. Note also that Japan is a significant military asset for the United States, housing a significant part of its air and sea power. (The Seventh Fleet is based in Japan, among other things.)
I do not know how much this will register with a Trump administration, particularly if it decides to significantly pull back its overseas commitments. But the US military will have to locate its assets somewhere. Why not rent-free, overhead-subsidized Japan? And as for the nuclear umbrella, it’s costing the United States little more than a promise. And the Abe administration is more than eager to help out in keeping vigil on the North Korean threat.
All in all, it looks negotiable to me, with a little tweak here, a little tweak there. In fact, the Abe administration is likely to welcome (quietly) an opportunity to shore up national defense in response to demands from the Trump administration.
One area where I do not think that the Trump administration will cause any problems for Japan is in its overture to Russia. I have probably been in the minority on this in claiming that it will cause no problems for the United States because it will serve as a counterbalance to China in the Asia-Pacific region. In any case, Trump apparently has warm feelings for President Putin and for Russia more generally.
Which brings me to my final point: personal chemistry. One of the things that does not receive enough attention is Prime Minister Abe’s ability to be on good terms with Presidents Putin, Recep Tayyip Erdogan, and Rodrigo “Rody” Roa Duterte. (And I’m not even counting Fidel Castro, since he doesn’t really fit into this narrative.) Hypersensitive Authoritarian Leaders 101 appears to be an elective that Abe has a knack for. Need I say more? Okay, I’ll say more. How many countries other than Japan can offer the pomp and ceremony of an audience, no, a meeting of equals, with an emperor whose historically verifiable lineage goes back well over a millennium?
Case closed. And with that, I am going to go off on a bender.