Daniel Manning 
President Trump waves at the White House in Washington, April 14 (©AP/Kyodo).
With Donald Trump back in the White House, sweeping tariffs have once again taken center stage in US trade policy. A blanket 10% tariff on all imports — rising to 24% for Japan — initially signaled a serious threat to Japan's export-driven economy. A 90-day pause for non-retaliating countries, however, has eased pressure for now.
Still, the political logic remains clear: these tariffs are strategic, not economic. As journalist Shinichiro Suda observed, "Japan is negotiating inside a framework that America has already built — with American rules and American interests at the center."
Domestic reform, geopolitical recalibration, and strategic trade talks — beginning April 17 — will determine whether the country can turn a looming threat into a long-term advantage. Here are several steps Japan can take to reduce its trade vulnerability and turn challenges into opportunities.
Stimulate Domestic Demand
The first step is reducing Japan's reliance on exports by reviving domestic demand. For years, Japan has leaned on a weak yen and sluggish consumer spending, allowing exports — particularly to the US — to prop up GDP growth. But this dependence has become a strategic liability. Washington sees it as evidence that Japan is not shouldering its share of global demand.
The solution is straightforward: fiscal stimulus. Whether through targeted tax cuts, public works, or direct consumer subsidies, Japan must demonstrate a credible commitment to expanding its internal market. A revival of Abenomics-style spending would signal good faith to Washington — and restore confidence at home.
Dismantle Agricultural and Regulatory Barriers
Structural reform is the second pillar. Japan's agricultural sector remains heavily protected by tariffs and quotas. These barriers, originally designed to safeguard rural economies, now serve primarily to inflate food prices and provoke US frustration. Eliminating or reducing agricultural tariffs — especially on rice and dairy — would benefit Japanese consumers and remove a major irritant in bilateral trade relations.
In addition, many non-tariff barriers — from vehicle safety standards to food labeling — could be relaxed without compromising public health or safety. These regulations, while often justified as consumer protections, are increasingly seen abroad as disguised protectionism. Dismantling, or at least reviewing them, would not only please the US but also lower prices and improve consumer choice domestically.
Reframe the Consumption Tax
One of the more underappreciated levers Japan could pull is the consumption tax. In the eyes of Washington, this tax functions like a hidden tariff. President Trump listed VATs among the "unfair, discriminatory, or extraterritorial taxes" imposed on US businesses, workers, and consumers. Reducing it would achieve two goals simultaneously: it would stimulate domestic consumption and defuse a key point of contention with America.
Critics may argue that reducing the consumption tax is fiscally reckless. But in the current context — with Japan's access to the American market on the line — such a move could be economically strategic. In fact, it is arguably overdue.
Consider the India Precedent
India, too, has been hit with exceptionally high rates — in some cases even higher than those aimed at Japan. The reason? India's state-driven development model increasingly mirrors that of China, especially in its use of subsidies to boost exports in sectors like steel and electric vehicles.
In other words, Washington is not only punishing countries that trade with China but also those that adopt similar policies.
This precedent matters for Japan. It reinforces the idea that economic alignment with China — whether through supply chains, subsidies, or development models — carries growing risks. Japanese policymakers would do well to recognize this and adapt accordingly.
Deepen Energy Ties
Finally, Japan should take advantage of the US's growing role as a global energy exporter. By expanding imports of American LNG and crude oil, Japan can reduce its reliance on politically volatile suppliers and strengthen its strategic partnership with Washington.
Japan has long relied on energy imports from politically volatile regions such as Iran, Russia, and parts of the Middle East. US sanctions forced Japan to cut Iranian oil imports in 2012, while Russia's invasion of Ukraine raised concerns over LNG supplies from Sakhalin. Instability in Iraq and Saudi Arabia has also caused supply shocks.
Energy security, once treated as a purely domestic issue, has become a crucial component of international diplomacy — and a valuable bargaining chip.
From Threat to Opportunity
Trump's tariffs are a wake-up call. They expose the vulnerabilities in Japan's economic model but also highlight areas where reforms could yield immense strategic and economic benefits.
If Japan is willing to act boldly — by stimulating domestic demand, reforming its trade policies, and adjusting its tax system — it could turn this moment of crisis into a turning point.
In the high-stakes game of international trade realignment, the winners will be those who understand the new rules — and move first.
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Author: Daniel Manning
