Japan Inc warns of global trade contraction under Trump presidency: poll

By Tetsushi Kajimoto

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All the while the New York Stock Exchange keeps on breaking records.

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I've recently gone thru half a dozen IR reports by listed Japanese corporations. They were drafted about a month before publication, and every single outllook and economic assessment they provide is wrong. Plain wrong.

The yen's gonna stay low for a long time! Low long term int. rates will continue!! no movement in sluggish Japanese equity prices forecast!

Hilarious. They were grossly wrong then, and they are probably wrong now.

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He has threatened Mexico and China with punitive tariffs that some economists have warned could spark a trade war that could potentially roll back decades of liberalization.

Wouldn't they violate WTO rules?

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Wouldn't they violate WTO rules?

Trump's probably borrowing a page from the Andrew Jackson playbook on courts. "John Marshall has made his decision; now let him enforce it!"

In this particular issue I am personally conflicted. For too long we've watched as Japanese companies have benefited from a highly protectionist environment for them. Whether it's cultural or governmental, Japan protects Japan Inc. at a level that is the very definition of "do as I say, not as I do" when they then complain about wanting free trade, etc.

So in that regard, I'm more than happy to see Japan Inc and the Japanese governmental hypocrisy of protectionism on they way in and free trade on the way out get smacked down. On the other hand, the buffoon who is trying to implement it is frightening.

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Free trade is not fair trade. Trump is for free and fair trade. The U.S. trade problem is with China, not Japan. Running a trade deficit of over $800 billion dollars with China is not fair trade.

Trump will put an end to this one-sided balance of trade.

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Trump is gearing up for a massive stimulus of the American economy - it is those Japanese firms that are truly global that will benefit.And rather than criticise and bemoan the uncertain future, maybe Japanese companies should be looking at lobbying for stimulatory reforms in Japan!

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"All the while the New York Stock Exchange keeps on breaking records."

I remember a lot of graphs from first year economics courses I took when I was 18. The professor wrote them on the board and explained each line and why the line had a certain slope and shape. I was curious. And yes. It made sense. It still does. So when I read about various opinions and why people have them, I run little analyses and graphs and think about whether a conclusion has been reached rationally, or if I can fade it. So then I come to comments people post, and I often shake my head about what INFORMS that opinion, what it means, does it matter?

Why would the US stock market go UP if there was some fear about a trade war? Well, the explanation is simple. First of all, a tit for tat exchange of tariffs that is likely to occur under a mercantilist system will NOT hurt producing firms in the US. the DOW JONES INDUSTRIAL and let me emphasize INDUSTRIAL average is likely to get a boost from tariffs because US produced/engineered/marketed products will be able to have higher prices and still be competitive. See how that works? HIGHER prices meaning more revenues and maybe higher profits.

So what is the problem? Well, if you draw the graphs with a tariff system, there is always what is called a DEADWEIGHT loss to consumers. Consumers lose, efficiency loses. Trade overall suffers, everyone is a little worse off in a tariff system.

So the stock market gains you are seeing is further channeling of benefits from (poor) consumers to (rich) companies. See how that works? Is that what rural America voted for? Higher Walmart prices?

And in the long run, other countries will impose tariffs and losses will propagate. This is why trade agreements are a good thing in the long run. And people just don't pay attention in their college classes anymore, or they would know that.

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Fair trade is what Japan refuses to do and they deserve to be taxed by other countries. The USA allows Toyota and Honda and other auto manufacturers to build plants in the USA. But Japan refuses to allow US Auto plants in Japan and tax them 100%. The same USA car in the USA sells for $25,000.00 but in Japan its $50,000 dollars. Japan seems to be bent on a 100% protectionist state. This includes food and agriculture and meat products. They protect their farmers and keep prices high. Again 1 way. Protectionism can be fought country by country and if it takes harm to the protectionist countries that do not want to be fair traders they will lose.

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""The USA allows Toyota and Honda and other auto manufacturers to build plants in the USA. "

Wow. This is backward. I think instead of ALLOW you should probably use ENCOURAGE. And GM or FORD could put a plant in Japan if they really wanted to. They gave up on the Japanese market in teh 90s, if I recall, and went to SUVs and trucks. Good for them. I believe Toyota now produces more vehicles in the US than anybody else. And it produces the vehicles with the highest percentages of US components and labor. What is not to like? Remember that Trump cites FORD as the bad actor in US auto production. Let's remember that.

Y'all have it pretty well backwards. Japan has pushed strongly for trade regimes and it has benefited by them. It has been a US ally ever since the US round of GATT... anybody here know what I am even talking about? Probably not. Japan has supported a free trade regime. The problem is China, which has the second largest economy in the world, but still expects to be treated like Ghana or Haiti. It is time for China to start carrying some burdens in international trade regimes.

Trump's mistake is in going back to bilateral negotiations. They will take forever, be politically contentious, and wind up hurting world trade. TPP was the way to go but that ship has sailed. You all have a good day. Go read a book on the subject of international trade from GATT to TPP. There are people who know a lot about this subject. They are not posting here.

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The yen has nearly reversed all of this year’s gains since the U.S. election - easing concerns about Japan’s export-reliant economy

Yes, the positive response to Trump's election has been a lucky break for Abe and Abenomics and those invested in it in the short-term, although so lucky for Japan's savers who again have seen the relative value of their savings wiped off again

But longer term it's bad news, because the positive conditions emanating from hopes for the Trump administration are papering over the cracks in Japan's economy. Domestic economic reform is needed for sustainable long term growth. I pray though that successful reforms in the US might encourage people to want to try the same thing in Japan, where reforms are far more desperately needed.

All the while the New York Stock Exchange keeps on breaking records.

Yes, how much further has the Nikkei got to go now until it breaks its record high? Another 100%?

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What Japan Inc. means is the party is over. No more currency manipulation or charging $4,000 to $10,000 tariff on US-made cars imported to Japan while they get a free ride in the US by opening screwdriver car factories in America...

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"....there is always what is called a DEADWEIGHT loss to consumers. Consumers lose, efficiency loses"

That's merely a theory, and one that has since been proven wrong by "the real world." Since the shift to "fee market" policies, with lowering of tariffs, workers' real wages have stagnated or barely grown, while the rich have gotten richer, richer and richer, and we've ended up with a "Walmart Economy." Rich companies, poor workers.

The neo-classical school of thought it seems you learned about is on the way out.

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Tatanka, Japanese car companies in USA are not there uninvited.

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tinawatanabe, you are too young to know this, but in the late 70's and early 80's Japanese car companies were forced to open "screwdriver" factories in the US due to the enormous pressure from the US government, the media and American public opinion. The "free trade" party is over for Japan & China. As of January 20th the US will have a real trade negotiator looking out for the American workers.

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Automakers. In Japan, they create cars for using on Japanese roads. They made divisions in USA to create cars to be operated von American roads.

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Trump plays fast and loose with the facts in his rants. The US is hardly the gold standard ot a free-trade nation. The long history of buying on trade is too long to post about.

If the US plays hardball, so should Japan. Japan and China manufacture virtually all electrical parts now. The world runs on resistors, capacitors, diodes and the PCB they are mounted on. The US has lost the infrastructure and corporate knowledge to manufacture electronics.

It would take atl least 6 years for the US start to manufacturing these parts again, if they had access to some of the minerals required to do it. If China blocked the rare minerals, the US would never be able to manufacture these again.

Screw the US and its protectionism. The US is one of the most unfair traders on the planet, regardless of how many Americans vote this post down.

The NSA and CIA have always captured communications to pass on intellectual property and marketing strategies of foreign competitors to US companies. It's well documented and known by people in the communications, energy and the electronics industries.

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The US has higher tariffs on everything, so stop the disinformation. Japanese car companies employ over 1.5 million Americans. The US has tariffs on imported autos, Japan has no tariffs. The US has a 50% tariff on pickup trucks, Japan has zero tariff on cars.

Japanese roads are filled with Mercedes, Audi's and BMW's. US cars are crap and ugly. The US car companies only recently built cars with left-hand drive.

Stop the lies about trade!

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toshiko, you need to do your homework. The only difference between a Japanese car model sold in Japan and the same model sold in the US is the safety features. The US has much higher safety standards, thus the added reinforcement to the car frame; the average US model is 30 to 40 kg heavier than the same model sold in Japan.

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Since the shift to "fee market" policies, with lowering of tariffs, workers' real wages have stagnated or barely grown

Yet suddenly people became able to buy all sorts of great products including ones that never existed before for far cheaper than before. Prices getting cheaper boosts the value of peoples wages.

Japan has zero tariff on cars

Japan does have all sorts of inane regulations that act as non-tariff trade barriers however but as for cars I do tend to suspect that the US makers are simply inferior to their Japanese and European competitors.

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The "free trade" party is over for Japan & China. As of January 20th the US will have a real trade negotiator looking out for the American workers.

Be careful what you wish for. There are other countries nowadays that have a thriving middle class that companies want to sell to, not just America anymore.

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Here is what I couldn't write. I think everybody knows: @tina : US did not ask. Each Japanese Automakers negotiated with different state.

@tatanka. In US, left side handle cars with mileage fot distance. And gallons for gasoline. In Japan,meytric system.

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"Prices getting cheaper boosts the value of peoples wages."

Then why has US household debt as % of income more than doubled since 1984, and that's after signifcant rise in the number of dual income households. The middle has barely been treading water since the govt shifted for "free markets" and "free trade."

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It is time to face the reality of changing times and move into the Chinese sphere of influence. China is the future, whether you like it or not. The US will implode under Trump.

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American car makers have to comply with agreement with zUAW. Can't Automate factorize. JPanese automakers are not with Union.

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The US will implode under Trump.

I think the US is resilient enough to not implode. But much more difficult times are a definite possibility. One thing Trump doesn't seem to realize is that the US is not alone on this rock. It's less than 5% the population of the planet. The more isolationist they get, the more it will hurt them, not the rest of us - or at least, not the rest of us as much as them. The other countries will just form different relationships. It's very likely that China will expand its sphere of influence in the next few years.

...which to be fair isn't really a better option than Trump's America. Just a different one.

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Strangerland, Maybe you are right. I hope the US survives Trump. And I'm not saying that the China option is a great one. Kind of like the China Syndrome.

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No more currency manipulation or charging $4,000 to $10,000 tariff on US-made cars imported to Japan while they get a free ride in the US by opening screwdriver car factories in America...


In case you didn't know the duty rate for cars imported into Japan is ZERO %!!

But they do get hit with 8% Import Consumption Tax, same as ALL imported products into Japan.

But once inside there are numerous NON-tariff barriers for sure, and YES most have long given up on the J-market be cause along with the non tariff barriers the market is shrinking rather quickly, which leaves foreign makers a few niche markets, like sports cars, some SUVs & luxury cars, sedans etc, selling in Japan has LONG not been worth the hassle

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GW Non-tariff barriers like pollution standards and structural integrity and safety standards that US car makers cannot seem to satisfy. And they never advertise. VW started advertising about 5 years ago on TV, and now you see VWs on the road. But there are US car dealers here selling US cars.

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@JeffLee "That's merely a theory, and one that has since been proven wrong by "the real world." "

No it isn't. Deadweight loss is a fact. You can model it, simulate it, and find it empirically. You can calculate it. And it has been calculated using data going all the way back to the 1920s and 1930s, and even the old USSR used to run their economy assuming it. That is EVEN the USSR, which could not even be persuaded that an interest rate is a good thing, agreed with ALL signatories to GATT, that deadweight loss is a real thing whether Jeff Lee believes it or not. The reduction of tariffs has done more to benefit mankind than walking on the moon, and yet Jeff Lee is going to sit back and say.... "well.... that is just your opinion man...." And I suppose the moon walk was a hoax, right?

If you think there is a problem with NAFTA, for instance, think about what might be causing problems associated with NAFTA. I think it is immigration. And you will probably agree. The reduction of tariffs was not the problem, it was the refusal of 1. Californians and others to send illegal immigrants back to Mexico and 2. low income US workers to retrain and abandon dreams of manufacturing jobs. NAFTA was designed for the US to move UP in income levels based on higher value added manufacturing and for Mexico to move UP in income levels by providing HUGE POOLS of low wage jobs.

NEITHER OF THOSE HAPPENED because, well, Americans are precious little flowers, frankly. Nobody was willing to make the simple sacrifice of sucking it up and moving to a better future. Californians and others should have raised minimum wages and invested in education and automation so that their economy would look more like Taiwan's. Their incomes would have increased and they could have bought cheap products from Mexico instead of China. Mexico would be better off having all that American investment instead of China, too.

So you get a bunch of unemployed uneducated Americans getting beaten out in the job market by illegal immigrants, and you get chaos in Mexico, with investors like Carlos Slim owning it all simply by default. Bill Gates should have been investing in Mexico instead of hiring Indians. GM should have turned its line workers into sales reps and sent them to other countries to sell Mexican-made GM cars. The results have ZERO to do with goods flows. They can be explained by labor and capital flows entirely. Can you see that? Go look at the data. It is all there.

Don't blame that on NAFTA, that is all on lazy Americans who did not follow through. Raising tariffs will only make things worse.

I despair over the state of the US education system. This VERY BASIC STUFF, if learned properly, can make the world a much much less confusing place. People are not only ignoring history, they are ignoring simple analytical methods that can lead them to better decisions.

Jeff Lee. Are you an economist? Have you taken economics courses, and if so, where? I am aghast that this very basic Macro101 stuff is beyond somebody who might be regarded as educated. You seriously want to say that "deadweight loss does not exist" in relation to tariffs. You want to say that "the real world" does not work like that? Neither Donald Trump nor Melania has a single college degree, so they are just ignorant about this stuff. Do you want to say that you learned this, but you don't believe it?

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"Deadweight loss is a fact."

Nope. Plenty of economic models, seeking to be "empirical," get debunked, and yours is one of them. For example, why not take the "deadweight" concept to the 36 trillion dollars - trillion - that corporations are hiding in offshore tax havens, which is possibly putting a much bigger drag on the global economy than tariffs that protect jobs and support middle-class wages? The answer is that it's outside the scope of the neo-classical theories you learned, making those theories very limited in understanding the world.

When tariff regimes were more widespread in the West, there were no financial crises, a growing middle class and equitable income distribution. That all ended when the tariffs started coming down. More of the growth in the West went to the super rich. And if it weren't for tariffs, Japan would still be a developing economy.

"Jeff Lee. Are you an economist?"

I majored in economics, and today I make my living writing about business and economic issues and editing the work of others on the same subjects.

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