Nations worldwide are scrambling to react to the Trump administration’s tariff hikes. As I watch the media narratives and the so-called “experts” on TV, I find it impossible to discern Trump’s true intentions. Academic commentary, in particular, strikes me as incredibly shallow; this is a raw political game, not a subject that can be decoded through textbooks. Unless the information comes from someone with an inside track to the Trump administration, it’s hardly worth listening to.
The True Motive: Picking Sides
If we look at conservative media outlets, the underlying sentiment in the U.S. seems to be: “You’ve exploited the American market for years while cozying up to China. It’s time to choose—are you with us or against us?” If this is the case, the wave of countries seeking trade negotiations with the U.S. will likely be forced into the American camp. Given that many politicians in Japan’s current ruling party still prioritize relations with China, one has to wonder if our negotiations will even stand a chance.
While I don’t intend to turn this blog into a geopolitical forum, the reality is simple: as long as Japan remains under the U.S. nuclear umbrella, “independent diplomacy” is a fantasy. If we want the U.S. to stop breathing down our necks, we must strengthen our autonomy in security and energy. On the trade front, if Japan could pull off a masterstroke—like bringing the EU into the CPTPP—our bargaining power would skyrocket. Without such maneuvers, we have little choice but to comply with U.S. demands: open our markets further and distance ourselves from China.
The Economic Root of the Friction
The U.S. frustration with Japan is not without merit. Japan’s economic policies are fundamentally flawed. Despite having a massive current account surplus and the world’s largest net foreign assets, Japan has clung to meaningless austerity measures. The result? Stagnant growth paired with a consistently massive trade surplus with the U.S.
This imbalance benefits neither Americans nor Japanese. By stimulating domestic demand, the quality of life for Japanese citizens would improve, and American companies would see expanded export opportunities. Furthermore, if the Japanese economy achieved higher growth, the defense budget would automatically increase even without raising its percentage of GDP, making Japan a more reliable ally for the U.S.
A Concrete Solution: Abolish the Consumption Tax
One specific countermeasure would be the abolition of the consumption tax. In reality, the consumption tax (VAT) originated in France as a de facto export subsidy (for those unfamiliar with this concept, a quick search on the mechanism of “tax borders” will clarify it). The Trump administration likely views it exactly this way. By ending this tax and accelerating the growth of domestic demand, both the Japanese and American economies would see a positive impact.
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