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The Trump Administration and U.S.-Japan Relations

Presentation by Glen S. Fukushima

• U.S.-Japan relations expert Glen S. Fukushima talked about the future of the relations under the “unpredictable” Trump administration on May 4 at a presentation in Chicago hosted by the Japan America Society of Chicago.

• Fukushima, Senior Fellow at the Center for American Progress, worked on U.S.-Japan and U.S.-China trade negotiations at the Office of the U.S. Trade Representative (“USTR”) from 1985 to 1990. Following this assignment, he gained 22 years of business experience in Japan, where he served as Vice President of AT&T Japan and also President and CEO of Airbus Japan. He also served two terms as President of the American Chamber of Commerce in Japan.
• From 2015 to 2016, Fukushima was a member of Hillary Clinton’s Asia Policy Working Group. Currently, he is a board member of the Japan-America Societies in Boston, San Francisco and Washington, D.C., as well as the National Association of Japan-America Societies.
• In 1993, he won the Ohira Prize with his book “The Politics of U.S.-Japan Economic Friction.”

Big Change from the Obama Administration

• In November 2009, then President Barack Obama visited Tokyo and announced himself as
“America’s first Pacific president” in his speech. This was followed up with his policies that reflected the importance of the Asia-Pacific region as Obama perceived it.
• In October 2011, then Secretary of State Hillary Clinton published the now famous article, in which she listed six priorities concerning Asia: strengthening alliances (especially Japan and South Korea); engaging with emerging powers (China, Indonesia and India); enhancing economic activities in the region; working with multilateral and regional institutions in the region including the Association of Southeast Asian Nations (“ASEAN”) and Asia-Pacific Economic Cooperation (“APEC”); advancing security presence in the region, not only with the alliances but also with countries such as Australia, Singapore, India and others; and promoting democracy and human rights, particularly in countries such as North Korea and Vietnam.

• These six priorities would have been the basis for the U.S. administration’s policy toward Asia if Clinton had won the 2016 election, Fukushima said.

Donald Trump’s View of Japan

• In 1987, Trump spent $100,000 and placed a full-page ad in the New York Times, Washington Post and Boston Globe. The ad criticized Japan on the following five counts: Japan is stealing American jobs; Japan only exports goods to the U.S.; Japan does not import anything from the U.S.; Japan manipulates currency; and Japan is free-riding on the U.S. on defense. Trump repeatedly made these accusations until his 2016 presidential campaign through interviews, comments and articles.

• Fukushima noted that Trump’s criticism is interesting in that it is less about Japan but more about the U.S. government officials, both the Democrats and Republicans. “Japanese are really smart, I really respect them,” he often said. “Our government officials are so stupid to have allowed Japan to take advantage of the U.S.”
• Trump has repeatedly complained in interviews and articles that “Japanese sell us their consumer products, we pay a lot of money for them, and then they use that money to buy America; it’s a great trick.” He has a strong sense of being taken advantage of by Japan.
• During the presidential campaign, he added China, South Korea, Vietnam, Mexico and Saudi Arabia to his list of the countries that he saw were taking advantage of the U.S. Still, Japan has been a core of his accusation since 1980s.

Trump Administration’s Trade & Economic Policies

• Trump announced withdrawal from the Trans-Pacific Partnership (“TPP”) three days after his inauguration on January 20. He also publicly talked about withdrawal from the North American Free Trade Agreement (“NAFTA”) but he now seems to be leaning toward renegotiating it. Regarding the World Trade Organization (“WTO”), Trump once called it a needless, useless organization, which caused a concern that he may withdraw the U.S. from it. But the issue hasn’t come up recently.
• Trump is a champion of bilateral agreement. With Wilber Ross as the Secretary of Commerce, there will certainly be more discussions on bilateral free trade agreements, Fukushima said.

• Of the tax issues, the border adjustment tax is particularly a “huge issue,” and there seems to be a strong support for it within some members of the Republican Party, led by House Speaker Paul Ryan. Meanwhile, the idea of introducing a 20% import tariff is a “very contingent issue” because of a strong opposition by the U.S. importers, according to Fukushima.

• Infrastructure investment is one of Trump’s major priorities promised during his campaign and is expected to provide investment opportunities to foreign businesses. Considering that there is a group of strong supporters of the Buy American Act (“BAA”)” in the White House, favoritism for “American companies” is expected in the area of trade and investment. However, this could be problematic because there are so many Japanese (and other foreign) companies investing in U.S. businesses, and clear qualifications of an “American company” have yet to be defined.

U.S.-Japan Relations under the Trump Administration

• Japanese Prime Minister Shinzo Abe arrived in Washington, D.C. on February 10 for a talk with Trump. Subsequently, Trump issued a statement affirming that the U.S.-Japan security relations are the “cornerstone” of the American policy in East Asia. This is the same expression used by the Obama administration, which indicates continuation of the security policy set forth by the previous administration.

• Fukushima said he had an impression that Trump wanted to focus on establishing security relationship with Japan during the meeting in Washington, D.C. and planned to negotiate on the economic aspects in Mar-a-Largo. But the unexpected missile launch by North Korea intervened, and it resulted in the joint statement affirming that the U.S. was “behind Japan 100%.” Overall, on the security side, there has not been any change between the U.S. and Japan, Fukushima added.

• Japan spent several months preparing for the Trump-Abe meeting, Fukushima said, and Abe came to Washington, D.C. with a well-crafted package of proposals. Many of them were proposals of Japanese investment in the U.S. that would result in creating American jobs. The Japanese government hoped this package of proposals was in line with Trump’s agenda of job creation, and would be sufficient to distract Trump from focusing on bilateral trade talks.

• Just before Vice President Mike Pence visited Japan in April for the first U.S.-Japan economic talks, the Trump administration released a statement saying that the upcoming talks would primarily be to set up a framework for subsequent discussions, thus thwarting expectations for a series of real trade negotiations.

• In contrast with the well-prepared Japan, the Trump administration has very few people in place to assume responsibility in forming economic policies in connection with Japan. To date, out of the 4,000 senior administrative positions to be filled, only about 1,000 have been confirmed. It is expected to take a few more months for the administration to fill all the required positions.

• What is sociologically interesting, Fukushima said, is that the U.S. and Japan are two polar extremes when it comes to the issue of administrative change. In Japan, bureaucracy is well preserved irrespective of political changes. In contrast, in the U.S., change of the administration requires a comprehensive change in its bureaucracy as well. Considering this, it will be some months until the U.S.-Japan economic talks actually begin, Fukushima predicted.
• Trump is asserting that trade between Japan and the U.S. should be “free, fair and reciprocal.” Fukushima said we will have to wait and see what exactly Trump means by “reciprocal.”

• According to Fukushima, the Japanese objectives during the Pence visit were very clear: first, to make sure that investment proposals Japan was making would be sufficient to satisfy the U.S.; second, to avoid bilateral agreement; third, to avoid discussion on currency; and lastly, to avoid linking national security to trade.
• The U.S. government has been reducing the linkage between these two issues, taking a stance that they were unconnected. But Trump, who was a real estate negotiator, may take “everything on the table” into account, including the linkage of security and trade. As we all know, he dropped his previously favorite talk of China as currency manipulator during his meeting with Chinese premier Xi Jinping in order to push China to exert more pressure on North Korea. Trump being so unpredictable, “you have to keep guessing [what he’ll do next],” Fukushima said.

“Personnel is Policy”

• It seems that in the Trump administration, policies can change significantly depending on who assumes which position, Fukushima said. He explained the three groups of people in the Trump administration who have influence on the course of this administration.

• Business people. This group includes former business people with experience in the financial area, such as Secretary of the Treasury Steven Mnuchin, Commerce Secretary Wilber Ross, and Secretary of State Rex Tillerson. These are the people who favor a stable, predictable environment, low tax rate and deregulation, while leaning toward avoiding trade war.

• Military personnel. This group includes Defense Secretary James Mattis and National Security Advisor H.R. McMaster. They prefer stability and value continuity in alliance.

• Unpredictability. This group includes Senior Advisor Steve Bannon and those who are close to him, such as National Economic Council Director Gary Cohn, U.S. Trade Representative Robert Lighthizer and National Trade Council Director Peter Navarro. There is also Jared Kushner, the husband of Trump’s daughter Ivanka. Kushner “does everything,” assuming the overall responsibility for preparing for the visits of several foreign dignitaries to the White House.
• Some people in this group who are responsible for economic issues, such as Lighthizer and Navarro, are known to be critical toward countries like China and Japan, claiming that they are taking advantage of the U.S. economically. They assert that the U.S. needs to put “America first” as the global economic leader.
• The U.S. auto industry feels that the Japanese market is not attractive enough for them due to its slow growth, and has its eyes on other Asian markets. Rather than trying to expand their market share in Japan, the U.S. automakers are paying attention to auto imports from Japan, Mexico and Canada. Potential changes in the U.S. trade policy may change the future map of this industry, Fukushima said.

The Trump Administration’s Unpredictability

• Fukushima listed several reasons why this administration is so unpredictable. First, many senior government positions are still unfilled, and we don’t know who will be responsible for what governmental functions. The second reason is Trump’s management style, which is based on personal bond and loyalty to him. He lets people around him make proposals, but it’s himself who makes a decision in the end. That leads to uncertainty whether responsible officials’ opinions will be reflected in the final decision. The third is Trump’s inconsistency, as being proven by numerous instances, including his comments and attitudes on NATO, Syria, NAFTA, Terminal High Altitude Area Defense (“THAAD”), Janet Yellen, China policy, etc.
• Another relevant factor is Trump’s expressed policy to be unpredictable, as demonstrated by his comment: “All options are on the table.” He thinks that the U.S. has been too predictable, and should become “unpredictable” and “transactional.” This adds fuel to the unpredictability of his administration.
• Among the groups of personnel in the Trump administration explained earlier, the first and the second groups are against the wholesale change and are expected to persuade Trump toward stability and predictability. The third group is believed to be more influential and highly unpredictable in their course of actions.

Conclusion

• Before closing, Fukushima asked a question: What is the priority in the “Trump doctrine”? By “Make America Great Again,” does he mean to take us all back to the 1950s when the U.S. was the world’s superpower? Will he work on long-term strategy and vision to achieve his goals, or will he stick to his real estate developer’s negotiation tactics?
• Trump’s values are reflected in the words such as instability, inconsistency, unpredictability, unreliability, deconstruction, best deal, and transactional. Such values are “quite different” from the values held by Japanese organizations, Fukushima noted. Prime Minister Abe’s performance is seen favorably so far that he has done a “masterful job” in “managing” or “taming” Trump. Abe’s approval rating went up after his U.S. visit.

• In the financial area, Fukushima said it’s difficult to make predictions at this point, with the administration being still young. In terms of the U.S.-Japan security relationship, Fukushima doesn’t think that there will be many changes in general.
• Lastly, on the economic side, Fukushima said that, considering Trump’s long-standing fixation about Japan taking advantage of the U.S., there may be some attempts to change the U.S. policy, but it’s still unclear at this point.
• “So, stay tuned,” Fukushima concluded


Glen S. Fukushima