EDITORIAL | What to Do as Trump Signals Inward-looking Economic Policy?

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United States President-elect Donald J Trump has criticized the current President Joe Biden administration over inflation and other issues. Moreover, he has indicated his intention to fundamentally change US economic policy.

Apparently, the president-elect strongly believes that the only way to make America great again is to strengthen the economy. Also, the rise of China is leading to a relative decline in American influence in the global economy. As a consequence, Trump says, it is important to revitalize domestic industries and protect jobs.

However, there is a danger in words and actions that completely reject the current administration's policies. Unchanged, Trump's "America first" policy approach would have the US exert economic pressure on not only China. It would also pressure global partners and Western countries through tariffs and other measures.

When Prime Minister Shigeru Ishiba spoke with Trump by phone on November 7, the two men agreed to elevate the Japan-US alliance to a higher level. Japan and the United States must also deepen their economic and security cooperation. As they do so, they must keep authoritarian countries such as China in mind.

*Republican presidential candidate and former US President Donald Trump speaks at a campaign event in South Carolina in February. (©REUTERS by Sam Wolfe)*

Preparing for Tariffs

To that end, it is natural to make efforts to ensure that the US does not become inward-looking. Some reports say Mr Trump leans toward prioritizing economic benefits over the significance of alliances. The Japanese public and private sectors need to take measures based on that premise.

President-elect Trump has proposed cutting both corporate and personal taxes. He has also promised to impose high tariffs on imports from China. However, he additionally indicated his intention to impose tariffs of 10 to 20% on imports from other countries.

There is concern that these measures could ironically exacerbate inflation and further weaken the yen against the dollar. However, these are trends that Trump professes to abhor.

If high tariffs were imposed across the board on automobiles and other products, it would have a major impact on Japanese companies' strategies for North America.

During the previous Trump administration, the US slapped high tariffs on steel and other Japanese products due to security concerns. This time, according to US media reports, Trump alleged during the election that Taiwan had "stolen America's semiconductor business." If such trends continue, unity between the US and other nations could be undermined.

*Screenshot of the landing page for the United States Steel (US Steel) website (screenshot October 7, 2024)*

Keeping Promises and Agreements

The immediate focus is likely to be on Nippon Steel's proposed acquisition of US Steel. President-elect Trump, like President Joe Biden, has indicated that he opposes the buyout. But unreasonable blocking of the deal would present a definite problem.

Hopefully, Trump will also drop his opposition to the Indo-Pacific Economic Framework (IPEF), which was established under American leadership. In Mr Trump's first presidential term, he withdrew the US support for the TPP agreement. If the US repeatedly withdraws from agreements every time there is a change of administration, it will lose credibility in the region.

President-elect Trump should consider that America's withdrawal from the region would only please those countries anxious to see an end to US influence.