Japan Institute for National Fundamentals

　
The international community has been shaken by large-scale tariffs imposed by the U.S. Donald Trump administration. As for Japan, Prime Minister Shigeru Ishiba promptly held a telephone conversation with President Trump and sent Ryosei Akazawa, a close confidant and economic revitalization minister, to the United States for bilateral consultations.

Most of the world’s media have harshly criticized the Trump tariff as exerting negative impacts on the global economy and American people. Since the end of the Cold War, the international community has expanded the global free trade system by drawing in former Eastern bloc countries. The latest tariff policy by the Trump administration is running counter to the trend.

U.S. trade and investment policy targeting China

So why has the Trump administration launched a tariff policy that runs counter to the expansion of the free trade system? Given that the basis for calculating tariffs imposed on each country is ambiguous, some media reports describe the Trump administration as making no sense. Is that really the case?

In fact, on January 20, the day of President Trump’s inauguration, he issued a memorandum titled “America First Trade Policy,” ordering a comprehensive review of trade policy from the perspective of protecting the U.S. economy and national security. Specifically, he instructed to toughen export controls and review foreign investment regulations, with China and other adversaries in mind.

Next, on February 21, Trump released another memorandum titled “America First Investment Policy,” which called for encouraging investment from U.S. allies and partners while restricting investment between the U.S. and “foreign adversaries” such as China, Cuba, Iran, North Korea, Russia, and the Venezuelan regime of Nicolás Maduro.

The memorandum set out a policy of thoroughly regulating investment in the U.S. by China and other “foreign adversaries.” Specifically, it calls for restricting Chinese investment in U.S. technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors, for further deterring U.S. companies and investors from investing in China’s military-industrial sector, and for welcoming investment by U.S. allies and partners in the U.S. on condition that they avoid partnering with “foreign adversaries.”

Additionally, the memorandum says, “To further reduce incentives for United States persons to invest in our foreign adversaries, we will review whether to suspend or terminate the 1984 United States-The People’s Republic of China Income Tax Convention.” This indicates that the Trump administration is attempting to exclude China and other adversaries, that are trying to steal the free world’s cutting-edge technologies and intellectual property, from the international investment system.

Calling on U.S. allies to avoid partnering with China

In short, the Trump administration’s trade and investment policy has two objectives. One is to require foreign adversaries such as China to comply with international rules, threatening to further restrict trade and investment with them if they fail to do so. The other is to call on U.S. allies and partners to further increase investment in the U.S. and reduce U.S. trade deficits and to avoid partnering with adversaries such as China.

In this way, the Trump administration is trying to address threats from China and other adversaries that are abusing the current free trade and investment system to steal technologies from the U.S. and its allies and endanger their national security.

Therefore, the question is whether Japan will respond to the Trump administration’s China strategy that seeks to confront Chinese threats. We would like to see discussions and measures with a big-picture perspective.

Michio Ezaki is a member of the Planning Committee at the Japan Institute for National Fundamentals and a specially-appointed professor at Reitaku University.