Japan Fears Trump Trade Backlash After TPP Exit

U.S. President Donald Trump signed an executive order formally pulling the United States out of the Trans-Pacific Partnership (TPP) on Jan. 23, dashing hopes for the 12-nation free trade deal to come into effect.

Fears have emerged that Japan could be plagued once again by trade friction with the United States as Trump expressed views that there are unfair barriers in automotive trade with Japan.

The United States had joined hands with Japan in TPP negotiations. President Trump, however, pointed the finger at Japan over trade. Before signing the executive order to withdraw Washington from the TPP free trade deal, he said in a meeting with top executives of U.S. manufacturing firms, “… they do things to us that make it impossible to sell cars in Japan.”

His remarks reached Japan immediately. A senior executive of a Japanese automaker said, “We think that we have been making considerable efforts to integrate ourselves into the United States, so do we have to accept the same criticism we received 30 years ago?” The executive was reminded of the nightmare of the 1980s, where friction over automobile trade between Japan and the U.S. had escalated to the point that Japan was forced to impose voluntary restrictions on vehicle exports to the United States.

Obviously, the current situation is different from what it was in the 1980s. Japanese automakers built factories in the U.S. and produced about 3.85 million vehicles there in 2015. Of about 6.6 million Japanese vehicles sold in the U.S. in 2015, 1.6 million units were from exports from Japan — about half the peak of 3.43 million units in 1986. Japanese automakers, including their sales outlets and the like, have about 1.5 million employees in the U.S. Toyota Motor Corp. Honorary Chairman Shoichiro Toyoda and others were inducted into the Automotive Hall of Fame for their contributions to the creation of jobs in the U.S.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza