Trade war revisited: a US clash with China won’t be like its 1980s feud with Japan

Robert Boxwell says that US companies can benefit from a trade war, just as they did from the clash with Japan in the 1980s. The effects of this dispute, though, are likely to be more painful than they were 30 years ago

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Beijing is in no mood to back down in a trade dispute with the US. Illustration: Craig Stephens

Published: 10:34am, 11 Feb 2018Updated: 12:58pm, 23 Mar 2018

America’s last “trade war”, with Japan in the 1980s, was one of the best things that ever happened to American industry and consumers, because American businesspeople rose to the challenge of the time. Today’s looming trade war with China will be vastly different though, as will be how American industry responds. It’s coming soon to a theatre near you and may have a long run.

In the 1980s, Japanese companies were clobbering American competitors across a variety of industries, their success due to a mix of innovative business practices and products, US arrogance and a weak yen. The latter, tolerated by successive American administrations as a cost of helping post-war Japan, was largely solved as part of the 1985 Plaza Accord.

By 1995, the yen approximately tripled in strength against the dollar. Japanese businesses, innovative and industrious, remained competitive, not a few by opening plants in United States, which were largely welcomed by Americans. There was little point in Tokyo giving a belligerent response. They were a military ally, not an adversary like Beijing. Perhaps more importantly, the Japanese were rich. Today, with US and Chinese militaries eyeing each other and millions of Chinese still poor, something closer to the opposite describes the situation.

The trade war with Japan had an upside for American industry: the quality movement that spread across the country, championed by Ronald Reagan’s Department of Commerce.

President Ronald Reagan answers questions during a press conference at the White House in May 1984. Reagan’s administration pushed back at Japanese trade practices, which resulted in a change in both US industry standards and a revaluation of the Japanese yen. Photo: Alamy

For a government that’s not in the business of business, it was the closest thing to a national economic policy many Americans had seen. Businesspeople, previously outraged by the Japanese “stealing” trade secrets, decided to join the club and took to “benchmarking” on an industrial scale, often with Japanese companies as their targets. The benefits of all that attention to quality were large and durable for US businesses and consumers. In the end, the “war” wasn’t very destructive.

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