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If U.S. President-elect Donald Trump pursues protectionist measures under the banner of his “America First” policy, the global economy will suffer a serious blow.
It is hoped that Trump will carefully consider what is in the interest of the United States and restrain himself from launching self-righteous tariff measures.
Trump promised in his presidential election campaign to take measures to impose high tariffs on imports from foreign countries and protect domestic industries. He intends to impose a 10% to 20% tariff uniformly on all imports and a 60% tariff on imports from China across the board.
If the United States unilaterally imposes tariffs, China, Europe and other countries will retaliate, and a renewed trade war is inevitable.
The International Monetary Fund estimates that total global gross domestic product can be expected to decline by 1.3% by 2026 due to factors including the measures to be taken by the incoming U.S. administration and the reduction in trade volume caused by exchanges of tariff increases.
The world economy has developed through the promotion of free trade in goods and services. The United States, as the world’s largest economy, had been seen as being at the center of supporting free trade.
As globalization has hollowed out U.S. manufacturing industries, workers may have become more strongly opposed to it. The U.S. economy as a whole is showing remarkable strength, but lower income earners are suffering from high prices.
However, protectionist measures will not create enough jobs and will instead reignite inflation. This will only discourage Trump’s supporters. The United States should proceed with measures from a realistic viewpoint of what is in the national interest.
For the Japanese economy, there are concerns about the impact on the automobile industry. As the United States is the largest export destination for Japan’s automobiles, taking in about 1.5 million units annually, the imposition of high tariffs could significantly reduce Japan’s price competitiveness.
Trump, who places importance on bilateral deals, is expected to use the tariffs as leverage to compel actions such as expanding production in the United States.
As of the end of 2023, the balance of Japanese direct investment in the United States totaled about $780 billion (about ¥120 trillion), the highest among all countries for the fifth consecutive year. The Japanese automobile industry has also created many jobs through local production in the United States.
It is important for the Japanese government to persistently emphasize these contributions.
Trump’s disregard for multilateral frameworks is also a concern. The United States withdrew from the Trans-Pacific Partnership free trade agreement during his first term and is negative about the Indo-Pacific Economic Framework for Prosperity, which was promoted by the administration of U.S. President Joe Biden.
China is probably the country causing the most worry for the United States. In cooperation with Europe and others, Japan should convince the United States that multilateral frameworks are the most effective way to press Beijing to correct its unfair trade practices.
