Japan ‘rooting for Donald Trump’ in China trade war, but urges US not to ‘monopolise’ any benefits
- Tamaki Tsukada, deputy director general for economic affairs within Japan’s foreign ministry, is keeping a close eye on any deal with President Xi Jinping
- Chinese economists and officials are studying the history of Japan’s own trade war with the US in the 1980s for guidance on the current situation
A Japanese minister has urged the United States not to “monopolise” the concessions it extracts from China as part of any trade war deal, urging US President Donald Trump to share them with the rest of the world.
Tamaki Tsukada, deputy director general for economic affairs within Japan’s foreign ministry, said: “We should be vigilant about what kind of agreement is reached between the US and China, and make sure that Trump will not monopolise whatever benefits he extracts out of China.”
Tsukada, speaking at an event in Hong Kong on Thursday, said that while most countries are against any form of trade conflict in theory, many will be “rooting for Trump” in his ongoing tariff war with China, hoping that it leads to real structural reform within China, the benefits of which can be enjoyed by other trading nations.
“We need to recognise that all the heavy lifting will have to be done by the US. There’s a kind of alter ego of criticising on the surface, but at the same time rooting for Trump to get more out of China,” Tsukada told the Asia Trade Summit, organised by The Economist magazine.
Negotiations between the US and China are continuing, with the US suspending the planned tariff increase from 10 per cent to 25 per cent.
The deadline was due to be on Friday, but no further hard deadline will be imposed, the office of the United States Trade Representative (USTR) confirmed this week.
The South China Morning Post’s publishing partner POLITICO reported on Thursday that a document detailing the proposed trade deal, stretching to 140 pages, has been written and that it includes a “significant enforcement mechanism”.
If China is found to violate any provision of the deal, tariffs would “snap back” into place, or even be expanded.
China, meanwhile, would not be allowed to retaliate with tariffs, under the terms of the deal, POLITICO reported.
The deal is pending the agreement of President Xi Jinping, who is expected to meet with Trump at his Mar-a-Lago resort in Florida later this month.
Many are looking at the US-Japan trade war in the 1980s for historical guidance as to what will happen and indeed, the parallels are great.
“It is important that [the deal] is transparent, and the benefits are extended, that’s the lesson we can share with our Chinese colleagues out of our lessons in the 1980s and 1990s,” Tsukada said.
Japan was, at the time, an exporting powerhouse, a world leader in the production of many household items, cars and cutting edge technology such as semiconductors.
At its peak, Japan accounted for nearly 60 per cent of America’s total trade deficit through the late-1980s and early-1990s.
But it in the mid-80s, it agreed to punitive trade reform that would scythe the deficit, under pressure from then US president Ronald Reagan and his trade negotiators, among whom was current US trade representative Robert Lighthizer.
Under the terms of 1985’s Plaza Accord, Japan agreed to strengthen the yen against the US dollar, in order to make its exports more expensive and cut the trade deficit.
It also agreed to open up key parts of its economy, including its semiconductor market, in a move that allowed US companies to gain greater market share in Japan.
The response to these measures are often blamed for Japan’s “lost decade” in economic terms. The Bank of Japan lowered interest rates, causing bubbles in the property and stock markets, then years of deflation.
Masahiro Kawai, director general at the Economic Research Institute for Northeast Asia and former Japanese deputy vice-minister for finance, said on the sidelines of this week’s Asia Trade Summit that Chinese officials and economists are studying the Japanese response to the US-Japan trade war very closely.
“I speak to a lot of private companies and economists in the Chinese government and they want reform,” he said, adding that officials within the People’s Bank of China, the central bank, are aggressively seeking structural reforms.
Kawai said that the US-Japan trade war in itself was not to blame for Japan’s lost decade, rather it was the Bank of Japan’s delayed reaction to the bubbles in the market.
In the case of the US-China trade war, Kawai suggested that even if Trump and Xi finalise an agreement at the mooted Mar-a-Lago signing ceremony, it is unlikely to ease tensions significantly.
“I expect some kind of deal between China and the US, but the structural, fundamental issues are very difficult to resolve,” Kawai said.
“So even after Trump-Xi meeting, the conflict will continue, which will have negative impact on investment sentiment. Many companies have to continue to search the best way to adjust.”