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The Yomiuri Shimbun Economic revitalization minister Ryosei Akazawa speaks to media at Haneda Airport on April 18 after returning from the United States.
By Akihiro Okada
8:00 JST, April 26, 2025
U.S. President Donald Trump is significantly trying to rewrite the rules of postwar international trade and the international order, similar to the “Nixon Shock” of 1971, when then President Richard Nixon suspended the dollar’s convertibility into gold.
In both cases, the United States sought to reduce what it considered its excessive burden in maintaining the international order.
The key difference lies in the context: Nixon faced a struggling and stagnant U.S. economy burdened by the massive costs of the Vietnam War, while Trump stands at the helm of the sole superpower in the global economy.
As the United States attempts to reset the postwar international order for the second time, Japan’s position too is very different from what it once was. Japan will need to grasp these changes and forge a new strategy.
The 1944 Bretton Woods Agreement, which fixed exchange rates among countries and established the dollar as the reserve currency through its convertibility into gold, stabilized the post-World War II global economy.
However, the U.S. economy was exhausted by the costs of the Vietnam War, and as Western Europe and Japan caught up, the United States lost its overwhelming advantage by the 1960s. U.S. gold reserves declined rapidly, the dollar fell, and the United States fell into a dollar crisis.
As a result, on Aug. 15, 1971, Nixon announced the suspension of the dollar’s convertibility into gold, which was known as the Nixon Shock. The Nixon Shock marked the collapse of the Bretton Woods system.
The U.S. State Department released historical documents on the economic diplomacy of the Nixon administration in 2009. The documents from 1972 and 1973 are particularly interesting.
The Group of 10 countries, including the United States, Japan and several European nations, signed the Smithsonian Agreement in December 1971. This agreement sought to stabilize the exchange rates.
However, the dollar crisis did not subside. Countries began transitioning to a floating exchange rate system in February and March of 1973.
The diplomatic documents record Nixon’s words during his discussions with Treasury Secretary George Shultz, Under Secretary of the Treasury for Monetary Affairs Paul Volcker and others on March 3, 1973.
Nixon’s true feelings of irritation toward Europe are interesting.
“Now, the problem with Europe is that Europe today — and we’ve got to look at their psychology; leave out the economics — the Europeans are frustrated because the Germans can’t have an international policy; they can only look outward because they have no power. The French are parochial; after they were kicked out of Algeria and Vietnam, they have nothing,” Nixon said.
Shortly after that, he went on: “I judge the European politicians, except for [U.K. Prime Minister Edward] Heath, every one is a parochial; every damn one. I mean, [West German Chancellor Willy] Brandt doesn’t understand anything. He’s a nice, pleasant face and all that sort of thing, but he’s a dullard. In terms, except just through Berlin and the rest, he doesn’t understand the world and never will.”
Nixon’s relentless criticism of Europe calls to mind Trump’s dislike of the European Union.
Nixon also took a tough negotiating stance toward Japan.
In a diplomatic document dated Feb. 6, 1973, Nixon engaged in tough discussions about how to approach Japan, demanding that it raise the value of its currency and dismissing Japan’s views with the remark: “The Japanese sensitivities — to hell with them. Let’s go right ahead.”
On Feb. 14, 1973, Japan switched from a fixed exchange rate system to a floating exchange rate system, in which rates are determined by the market.
The Nixon Shock did not destroy the international order so much as pave the way for a new international order.
What kind of new international order is Trump aiming for?
Frequently cited in answer to that question is the 2024 paper “A User’s Guide to Restructuring the Global Trading System” by Stephen Miran, who is now the chairman of Trump’s Council of Economic Advisers.
According to the paper, the dollar is valued at a higher level than it would otherwise be because most countries hold it as their primary reserve currency. A strong dollar negatively impacts the competitiveness of U.S. exports, leading to the decline of manufacturing and contributing to the trade deficit. The paper argues that other countries should compensate for the U.S. burdens of providing defense and serving as a reserve currency.
To address this, the United States may seek international policy coordination, of the kind that produced the 1985 Plaza Accord, to correct the strong dollar. Under the hypothetical “Mar-a-Lago Accord,” a 2.0 version of the Plaza Accord, the United States would have other countries purchase 100-year U.S. Treasury bonds to transfer interest rate risks.
However, it is unlikely that a multilateral framework that imposes disadvantages on China and Europe would be a realistic policy.
Instead, the United States may target Japan directly to implement measures to correct the strong dollar because the U.S. nuclear umbrella protects Japan.
The Japan-U.S. tariff negotiations will be an acid test of Trump’s intention to shape the future international order.
On April 16, Trump met with Ryosei Akazawa, Japan’s economic revitalization minister, who was visiting the United States, and expressed his dissatisfaction, saying that there were no American cars running on Japanese roads.
Upon hearing this remark, I remembered an essay written over 30 years ago by Haruki Murakami.
In the early 1990s, Murakami was a visiting scholar at Princeton University. Japan-U.S. trade friction was intense at the time, and anti-Japanese sentiment was strong.
At the time, a U.S. columnist wrote that the U.S. government should provide subsidies to U.S. automakers. If it were to do so, the Japanese would park “two American cars in every Japanese driveway.”
Murakami noted the term “driveway.” He had been struggling with translating it, as there is no equivalent space in Japan’s urban areas, and most houses in Japan could not park two large American cars.
Murakami reflected that it was unfortunate that Americans did not understand the reality of Japan.
Trump’s image of Japan is deeply rooted in such an atmosphere.
But today’s Japan is not the same as in the past.
Based on this, we must consider future negotiations between Japan and the United States.
I want to point out four things.
First and foremost, the economic relationship between Japan and the United States is now vastly different from what it once was.
Japan’s share of the U.S. trade deficit was high in the 1970s and 1980s, reaching approximately 60% in 1991. Now, it is less than 10%. Among countries with which the United States has trade deficits, Japan ranks only seventh. Instead, China has become the United States’ largest trade deficit country, accounting for a quarter of the total.
Second, Japan and the United States once engaged in fierce competition in industrial products such as automobiles, but they have successfully established a mutually complementary relationship.
Japan still maintains strong competitiveness in industrial products, but the United States is strong in IT, finance, energy, food and pharmaceuticals. There are fewer areas of direct competition.
Third, the United States views China as its sole competitor. China constantly combines economic, diplomatic, military and technological power to challenge the international order. From a geopolitical perspective in East Asia, strengthening its alliance with Japan is the best way for the United States to confront China.
Fourth, while considering the importance of the Japan-U.S. relationship, it is essential to explore ways to align Trump’s political agenda with the national interests of both countries.
The gap between the reality of Japan-U.S. relations and Trump’s outdated image of Japan could make negotiations between the two countries difficult for Japan.
“The Japanese sensitivities — to hell with them.”
If Trump is truly a dealmaker who values practical benefits, he will not kick over the negotiating table with such a dismissive remark. I want to be able to bet on a Trump like that.
Political Pulse appears every Saturday.
Akihiro Okada
Akihiro Okada is a vice chairman of the editorial board for The Yomiuri Shimbun.
