As a real estate mogul in the 1980s, Donald Trump railed against Japanese economics. Now, to counter China, he is fatefully emulating them.
This analysis is being published by the South China Morning Post as part of a content partnership with POLITICO. It was written by William Pesek and originally appeared on politico.com on May 23,2018.
Donald Trump’s plan to make the American economy great again is deceptively simple: wrestle jobs, market share and indeed the future back from China. But what if the U. S. president, in the process, morphs America into Japan?
Three decades ago, Trump the real estate mogul railed against Japan-style tariffs and a zero-sum view of economic relationships. Japan, in the midst of its own economic boom, had “systematically sucked the blood out of America” and American manufacturing, he said in a 1989 “Morton Downey Jr. Show” interview. “They have gotten away with murder. They have ended up winning the war.”
Now, it’s China that is “raping” America, in Trump’s telling. When Trump told “Good Morning America,” in November 2015, that the Chinese “want to take your throat out, they want to cut you apart,” his comments smacked of déjà vu to Japanologists. “It’s the greatest theft in the history of the world,” he said of Beijing’s trade barriers in May 2016. Just last month, he fired off a tweet, charging “STUPID TRADE” with China, and another one slamming Beijing for “playing the currency devaluation game.”
But ironically, as Trump girds for economic battle with China, he is making many of the same mistakes Japan made in the mid-1980s, leading to its current stagnation. Rather than opening the economy, embracing new ideas and technologies, and welcoming competition, Trump has pushed protectionist gimmicks, currency manipulation and tax cuts aimed at the 1 percent—an approach that risks walling off the United States from a global economy racing forward.
Becoming more like Japan might not sound so bad on the surface. With some of the highest living standards anywhere, ultralow crime, top-rate infrastructure and humankind’s longest lifespans, the country hardly seems a cautionary tale. Japan’s economy, though, is another story. Twenty years of negligible growth and deflation have shackled Japan with the world’s largest debt burden, some of the lowest interest rates and a stimulus addiction that is deadening innovation. More than anything, Japan’s economy today is stuck.
Japan, thankfully, has gotten a boost lately, due to buoyant demand from China, the United States and Europe; Japan‘s economy has grown about 1 percent, on average, over the past several months. But even as the country is still experiencing its longest expansion since the 1980s, wages have stagnated. That’s because for 20 years now, rather than lower trade barriers, increase productivity, and rekindle innovation by modernizing education and training, Japan has relied on the now-obsolete 1980s economic model that originally propelled it to top global status: yen devaluations, fiscal and monetary stimulus, bailouts for industries like banking and steel, lower taxes, higher tariffs and non-tariff barriers as well.
This, oddly, is the future Trumponomics is courting as it seeks to transport America back to a simpler time when upstarts like China weren’t reordering global trade. His strategy has three prongs. First, there is the $1.5 trillion tax cut Trump signed in December, which he argued would put more money back into the pockets of individuals and businesses. Second, on January 24, Treasury Secretary Steven Mnuchin declared dead Washington’s 23-year-old strong dollar policy. While Mnuchin tried to walk back his comments, they fit with Trump’s campaign-trail comments about a “too strong” dollar “killing us.” (Indeed, the yen’s 2 percent gain against the dollar this year suggests traders are bracing for a weaker dollar, and China’s yuan is up 2 percent this year.) Third, and most importantly, Trump is trying to siphon jobs and investment from China. In March, his administration rolled out tariffs on steel (25 percent) and aluminum (10 percent), announced about $150 billion in levies on Chinese goods and issued vague threats of more to come.
