(Revised edition) Trade war of Trump
Wayo Women's University －Kageki Yamashita
At last it seems that Mr. Trump is about to begin a trade war. The United States imposes tariffs on imports of steel and aluminum from China and Japan to restrict imports.
In the US steel products import destinations, in order of increasing importance in 2017 ,Canada (16%), Brazil (14%), South Korea (10%), Mexico (9%), Russia (8%), Turkey (6%) ，Japan (5%), ... China (2%).
From the largest regarding aluminum, Canada (43%), Russia (11%), the United Arab Emirates (10%), China (9%), there are few imports from Japan.
Looking at this data by the US Department of Commerce, there is no reason why the US restricts imports of steel and aluminum from Japan and China (especially in Japan). However, importation from importing countries such as Canada is not restricted.
So, Mr. Trump decided import restricted countries by the ranking of the total trade deficit in the United States? No. 1China (347 billion $), No. 2 Japan (68.9 billion dollars), No. 3 Germany (64.9 billion dollars), in the trade deficit of the United States in 2016 which was found as of April 17. In spite of little difference between Japan and Germany, imports are not restricted to Germany or the EU.
Mr. Trump excluded Germany from the personal taste because his ancestor in Germany?
Has Japan not been an alliance?
As retaliation, China seems to place high tariffs on imports from the United States.
In spite of the fact that the United States imposes tariffs on the importation of automobiles from Japan, Japan has zero tariffs on the import of automobiles from the United States. Japanese cars are sold in the US because it is what US consumers have decided that. American cars are not sold in Japan because US companies do not manufacture cars that Japanese consumers want.
Moreover, Japanese Prime Minister Abe promised to purchase huge US weapons in response to Mr. Trump 's request. Also, Japanese firms accepted Mr. Trump 's request and decided to cooperate with the factory relocation to the United States.
However, this is what he did.
Japanese may be regarded as an obedient citizen, but only Japanese leaders are obedient to Mr. Trump , and many Japanese citizens feel angry about Mr. Trump 's measures this time. Depending on the public opinion in Japan, the attitude of the Japanese government against Mr. Trump 'sUSA may become chageable. If that happens, it will be a crisis of the Japan-U.S. Alliance and the US interest will be damaged.
What we have to pay attention to is that China and Japan have much of the US Treasury bonds(securities).
As of the end of June 2017, the ranking of countries holding US Treasuries. First place is China's 1,416.5 billion dollars, second place Japan 1.9 trillion dollars. It is possible that China and Japan may start to sell their own US Treasuries.
If both countries (even China alone) sell US Treasury bonds → → weak dollar → import price of US ↑ (← import price due to customs duties ↑) → inflation rate of the US ↑ → monetary tightening → economic slowdown of the United States. That is a possibility of a scenario. Furthermore, the depreciation of the dollar may further lead to a vicious circle of increasing the sale of US Treasury bonds.
Originally, Japan thinks that the Japan-U.S. Alliance is important, so I do not want to sell US Treasury bonds and worsen the relationship with the United States. However, if Mr. Trump gets such a hard attitude towards Japan, public opinion that opposes Mr. Trump 's "betrayal action" will not be silent. When the Japanese government fear that the domestic popularity rate falls, it may sell US Treasury bonds (hope not to do so). In particular, when China begins to sell US Treasury bonds and the depreciation of the dollar progresses, Japan may sell US bonds because the value of US Treasuries falls and Japan suffers losses.
Before the war, after the Great Depression of the 1930s, various countries around the world started import restrictions, so-called block economic system was established to protect their economy. Such economic conflict led to political conflict, the outbreak of World War II.
After the war, according to that reflection, the United Nations was formed on international politics and the free trade system was built on the economic side. GATT → WTO worldwide, EU, NAFTA, ASEAN, TPP in the world region were made, and FTA was tied between the two countries.
The globalization of the economy through the liberalization of trade makes it possible for industrialized countries to transfer factories to developing countries. Transferring factories to developing countries that can use low wages will be beneficial to management because it will be able to produce in any country when import restrictions of developed countries are lost. This factory relocation will allow developed countries to import low-priced products. However, this will reduce the employment of some industries in the importing country.
On the other hand, however, if parts, materials and raw materials can be imported at low cost by eliminating import restrictions, importing companies (such as Apple) that manufacture using them will benefit. These companies can supply low-priced products domestically.
However, when an importing country imposes a tariff and closes the economy, such low cost can not be used, so the product price of the importing country will rise. This could raise the inflation rate.
Also, price increases may reduce sales and reduce company sales and profits. If this happens, in the end, corporate profits and living standards of importing countries will decline, and there is a possibility that the stock price will fall.
Notice that the inflation rate in the US further increases as the import price increases due to the importing country's imposition of tariffs as well as the rise in import prices through the dollar's depreciation due to the sale of US Treasuries in each country.
Moreover, the depreciation of the dollar will not lead to an increase in US exports. This is because other countries raise tariffs as retaliatory measures. In addition, the progress of the trade war in such a world deteriorates the economy of each country, so it will not be a situation where each country buys US products.
Otherwise, the United States is likely to raise US interest rates along with the full-scale tightening of monetary tightening, as the government budget deficit of the Mexico border wall construction and infrastructure investment increase and tax cuts increase.
Also, as the sale of US Treasury proceeds, long-term interest rates will rise. Such rise in interest rates causes crowding out and possibly suppress private investment and equity investment in the United States, together with all of the above effects, there is a possibility that the US economy will stall.
At the same time, the progress of the depreciation of the dollar is also the progression of the appreciation of the yen, so Japan will receive double punches as the US tariff increases and the Japanese economy will stall. If so, there is a possibility that the support rate of the Abe administration may also decline in this aspect.
As a result, the political distance between Japan and the United States will go away, which will benefit North Korea and China.
Mr. Trump said that Japan had been utilizing the US, but most of the money earned by Japan and China 's export to the US went to purchase Treasury bonds (Also, many of the US mortgage funds before the Lehman shock was funded from Japan, China and Europe). It has returned to the United States as a fund to fill the US budget deficit. Even in the 1980s, Japan continued to lower official discount rate to 2.5% over the long term (→ the cause of the bubble) and to bury the US budget deficit.
If China and Japan sell US Treasury bonds, the price of US Treasury bonds will fall, and under those circumstances no one will buy US Treasury bonds. In other words, it will be impossible to fill the US budget deficit. China and Japan have cooperated in making up for the US budget deficit due to the purchase of US Treasury bonds and the resulting price rise of US Treasuries. In addition to seeing the trade deficit out of the twin deficits of the United States, it is necessary to see a budget deficit.
In this way, the United States, China and Japan have supported each other economically.
Each country in the world has a mutually dependent relationship.
People should recognize that as the citizens seek strong leaders to regain the glory of the past, or to get rid of past humiliation, countries will confront each other in the era of conflict as a result.
#importtax #UStreasury #USeconomy #economy
#Trump # Xi Jinping # Prime Minister Abe
