In this file photo from June 7, 2018, US President Donald Trump welcomes Japanese Prime Minister Shinzo Abe to the White House. China may have replaced Japan as the bogeyman, but Tokyo is still a villain in Trump’s mind, writes William Pesek. Photo: AP
Eye on Asia
by William Pesek
Eye on Asia
by William Pesek

Why South Korea and Japan are about to get trumped

  • Trump desperate for wins after lose of House of Representatives in midterm polls
  • Embattled US president is increasingly likely to slap levies of 25 per cent on imports of cars and auto parts, which will hurt Seoul and Tokyo

If officials in Seoul and Tokyo thought the insanity of 2018 is one for the record books, just wait until next year.

The wild card is, of course, Donald Trump, who just received a potentially catalytic comeuppance from voters. America’s showman-in-chief would have you believe the November 6 Congressional elections strengthened his mandate. Hardly. The House of Representatives swinging to opposition control is an existential threat to his scandal machine of a White House.

Donald Trump’s trade wars: is Japan the next ally in the US president’s sights?

Catalytic, because Trump 2.0 will be desperate for some wins that will no longer come via Congress. House Democrats can scuttle any new tax cuts or health care changes. More importantly, lawmakers are about to generate a bull market in investigations into Trump Inc. White House staffers are lawyering up as we speak.

The reason Seoul and Tokyo must worry is the low-hanging fruit they represent for an embattled US president.

With legislative doors closing and scandals swirling, Trump will issue a blizzard of new executive orders, including moves to escalate his trade war. Trump is almost certain to double the more than US$250 billion of Chinese goods he is now targeting. Odds are rising, too, that he will slap levies of 25 per cent on imports of cars and auto parts.

Both actions will make Korea and Japan arguably the biggest collateral damage victims anywhere. China is the biggest market for both economies. To disrupt the global auto industry, in the meantime, is to upset the supply chains that sustain Korea Inc. and Japan Inc. Korea and Japan are still top-heavy economies that derive disproportionate amounts of growth and tax receipts from export giants.

Making matters worse, this is personal. Trump’s world view, remember, never quite escaped 1985. His opinions on global trade, Nato and economic relationships all have a stopped-clock quality. China may have replaced Japan as the bogeyman, but Tokyo is still a villain in Trump’s mind.

In this file photo from April 27, 2018, North Korean leader Kim Jong-un, left, poses with South Korean President Moon Jae-in in the demilitarised zone (DMZ), South Korea. As his dream of a denuclearised North Korea slips away, Trump is sure to blame Moon’s government for costing him the Nobel Peace Prize Trump suggested he deserves, writes Pesek. Photo: AP

In a rather unhinged November 7 press conference, Trump singled Japan out specifically. He complained that Tokyo treats America “very unfairly” when it comes to trade. Prime Minister Shinzo Abe, it is worth noting, is Trump’s closest ally among trade partners. Also, Japan’s carmakers directly employ about 1.5 million Americans in states such as Alabama and Tennessee. Abe joined the Trans-Pacific Partnership, which will reduce tariffs everywhere. And yet Abe’s economy is being unfair to Trump’s?

Korea’s Moon Jae-in lacks the warmth Trump supposedly feels towards Abe. Yet President Moon holds the key to something very close to Trump’s heart – a denuclearised North Korea. As that dream slips away, Trump is sure to blame Moon’s government for costing him the Nobel Peace Prize Trump suggested he deserves.

As pressure grows in Washington, expect Trump to return to his greatest hits attacks on North Asia. Exhibit A: that Seoul and Tokyo should pay Washington tens of billions of dollars in protection money for living under America’s security blanket.

Another target: currencies. Trump has long complained that a healthy dollar is “killing us” and hinted at moves to take it down. Hence Trump’s bizarre brawl with his Federal Reserve for raising interest rates – for doing its job, in other words.

Hypocrisy abounds, of course. Even as Trump angles for a weaker exchange rate, he seeks no-currency-manipulation pledges from China, Japan and Korea.

A marked rise in the Korean won or Japanese yen would slam both economies. The modest success Abenomics has had since 2012 owes everything to a 30 per cent drop in the currency. Moon’s economy, meantime, is relying on this year’s 6 per cent won slide to help reduce a 9 per cent youth unemployment rate.

In both cases, growth and markets now risk getting trumped more than ever. Buckle those seat belts for Trump 2.0.

William Pesek is a Tokyo-based journalist and author. He has written for Bloomberg and Barron’s