The Importance of the Japan-U.S. Partnership

In the current international environment, where authoritarian states are becoming increasingly assertive, the role that the Japan-U.S. partnership must play in the Indo-Pacific region has become all the more important. What is at stake is not merely the military dimension of the alliance. Strengthening ties in the fields of economics and trade is also essential. There are at least two key reasons for this.

The first is the need to ensure the credibility of the alliance. A defense alliance functions as a deterrent by fostering the expectation among surrounding states that its members will fulfill their obligations in the event of a crisis. When the allied countries share values and interests, and when their economic and diplomatic relations are stable, the alliance is perceived as strong and reliable. Conversely, if disagreements in the economic realm escalate into political conflict, this may cast doubt on the reliability of the alliance in the security domain as well.

The second reason concerns the re-linkage of security and economic policy. From the end of the Cold War through the early 2000s, the global economy emphasized economic rationality, with countries actively engaging in foreign direct investment and trade. However, since the 2010s, as strategic competition between the United States and China has intensified, a trend has emerged toward reorganizing economic relations along geopolitical lines. Unlike the bloc economies of the pre–World War II era or the East-West division during the Cold War, the current situation is characterized by deep trade and investment ties being followed by the rise of geopolitical rivalry. When economically interdependent countries confront one other militarily, the effectiveness of “weaponization of the economy,” in which trade policies such as export controls and import restrictions are used as tools of diplomacy and security, increases. To cope with this, economic security, such as supply chain resilience, decoupling, and friend-shoring, has been the focus of policy research in many countries. In this era of growing interdependence and extended supply chains, cooperation among allies and friends has become essential to ensure the effectiveness of sanctions and to counter economic coercion.

U.S. Turn Toward Protectionism and the Worst-Case Scenario

As illustrated above, cooperation among allies in the fields of economics and trade holds increasing strategic importance in the context of intensifying geopolitical competition between the United States and China. However, in recent years, the United States has shown a reluctant attitude toward promoting trade even among its closest allies. It has distanced itself from liberalization negotiations and dispute settlement procedures within the WTO, and its stance on free trade agreements has become increasingly restrictive. Since the beginning of the second Trump administration, the United States has even gone so far as to threaten or impose tariffs on allied and friendly countries such as Canada, Mexico, European nations, Japan, and Taiwan.

This shift toward protectionism in the United States is largely driven by domestic labor interests. According to the Stolper-Samuelson theorem in International Economics, trade liberalization benefits owners of abundant factors while disadvantaging those who own scarce factors. Put simply, industries that rely on abundant factors are more likely to export, whereas those depending on scarce factors are more likely to compete with imports. For example, considering land, labor, and capital as the factors of production, Japan during the post–high-growth period had limited land but abundant labor and capital. As a result, workers and capital owners gained significantly from trade, while agricultural interests opposed liberalization out of concern over competition from large-scale foreign producers. Applying this logic to the United States, where land and capital are relatively abundant, agricultural and capital interests have largely benefited from globalization, while workers, who are exposed to competition with low-cost imports, have borne many of the negative impacts. Therefore, it is perhaps somewhat natural that the second Trump administration, which won the election campaign by emphasizing that it would save the workers, would seek to reduce labor-intensive imports through tariffs. It should be noted, however, that such across-the-board tariffs are likely to worsen inflation, and given the complexity of modern trade shaped by extended global supply chains, there are significant doubts about the effectiveness of these measures.

Regardless of the economic consequences, what warrants particular attention here is the impact on alliances. A tariff war among allied and friendly nations risks undermining mutual trust and weakening the alliances’ credibility. Immediately after taking office, President Trump imposed broad tariffs on Mexico and Canada, accusing them of inadequate enforcement of fentanyl trafficking and illegal immigration, even though the United States itself has failed to control these issues within its own jurisdiction effectively. In response, former Canadian Prime Minister Justin Trudeau described the measure as “a dumb thing to do” and announced retaliatory action. Such exchanges damage trust within alliances, and even if the tariffs are eventually removed, it is unlikely that the same level of trust can be fully restored.

The effects of these actions extend to third countries as well. Other states that witness such treatment will come to view risk hedging as a greater priority. In particular, countries caught between the United States and China may seek to reduce their dependence on the United States and could, over time, move toward strengthening ties with China. At present, China has applied for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Japan, Australia, and the United Kingdom oppose China’s accession. Canada and Mexico are also reluctant to actively support China’s entry due to their close economic ties with the United States. However, if confidence in the United States weakens, some member countries may begin to support China’s accession. If a majority of them do so, it will become increasingly difficult for the aforementioned countries to maintain their opposition. In fact, in the Regional Comprehensive Economic Partnership (RCEP) agreed to in 2020, Japan and Australia, which had been delaying agreement by insisting on a high-quality agreement, were pushed to the conclusion by China and Southeast Asian countries that wanted an early agreement. In recent years, China has approached individual CPTPP members in an effort to gain their support, and the situation remains unpredictable. In the worst-case scenario, the United States could become isolated from the trade frameworks of the Asia-Pacific region. If that were to happen, not only would U.S.-Japan relations suffer, but the credibility of the United States’ other bilateral alliances in the region would also be diminished, making cooperation on economic security significantly more difficult.

Managing the U.S.-Japan Relationship

How, then, should the U.S.-Japan partnership be advanced? Given the rapid and unpredictable nature of recent U.S. policy developments, any definitive conclusion remains elusive. However, at the time of writing, several key points of contention in U.S.-Japan relations have drawn particular attention. These include proposed tariffs that target Japan’s automobile industry, which maintains manufacturing facilities in Mexico and Canada, the proposed acquisition of U.S. Steel by Nippon Steel, and existing tariffs on steel and aluminum. Additionally, given President Trump’s repeated references to the idea of “reciprocal tariffs,” there is a risk that Japan’s agricultural market, where high-tariff items remain, could become a target. These industries have been subject to trade friction since Japan’s rapid economic growth. In each case, domestic industries have managed to survive through protection provided by their respective governments. These past experiences, in which political pressure led to protective measures, have reinforced a sense of success among domestic interest groups. As a result, labor unions and industry associations remain relatively active in lobbying, making these sectors politically sensitive and difficult to manage.

Generally speaking, avoiding public confrontation is essential to maintaining a strong cooperative posture among allies. To be sure, economic exchange always involves both common and conflicting interests. As Montesquieu once observed, “if one has an interest in buying, the other has an interest in selling” (The Spirit of the Law, Part 4, Book 20, Chapter 2). Still, it is equally true that sellers and buyers often have opposing interests over price, and when both parties are sellers, or both are buyers, they are likely to compete in the market. While such competition may be inevitable, only some issues escalate into political disputes. Generally, when issues were handled at the bureaucratic level or addressed by experts through the WTO dispute settlement mechanism, they were less likely to lead to visible deterioration in bilateral relations. In contrast, issues that reached the top political level and were widely covered by the mass media often became the focus of intense public debate, escalating into emotionally and politically charged confrontations. In order to preserve trust both within and beyond the alliance, it is crucial to prevent such debates from becoming overly heated. Even when an agreement is substantively limited or serves only to defer the issue, the demonstration of consensus and a cooperative posture may nonetheless yield significant diplomatic and security benefits.

One illustrative example from the first Trump administration in which tensions in a politically sensitive area were successfully defused is the U.S.-Japan Trade Agreement. During the negotiations, deliberate efforts were made to manage the issues at a lower level so as to prevent them from escalating to the leadership. In addition, Japan and the United States had already agreed in advance to effectively exclude two of the most contentious sectors, Japanese agriculture and American automobiles, from the scope of the agreement. As a result, the U.S.-Japan Trade Agreement became a limited deal that, from the perspective of WTO standards, does not qualify as a full-fledged Free Trade Area. Nonetheless, the agreement was reached ahead of RCEP, the Regional Comprehensive Economic Partnership that includes China and Southeast Asian countries, and successfully demonstrated bilateral cooperation between Japan and the United States.

Japanese government officials have a clear understanding of the need to handle such matters without politicization. A critical issue moving forward is whether the relevant U.S. counterparts share this understanding and can translate it into concrete action.