Japan urges cooler heads as trade war steps up another notch between the United States and China

Japanese Finance Minister Taro Aso speaking at the official opening of Japan House in London, on Sept 13, 2018.
Japanese Finance Minister Taro Aso speaking at the official opening of Japan House in London, on Sept 13, 2018.PHOTO: REUTERS

TOKYO - Japan has urged cooler heads to prevail between the world's two largest economies, warning that the global economy will suffer as the United States and China amp up their trade war with the latest round of tit-for-tat tariffs.

Finance Minister Taro Aso said that while trade imbalances are a huge problem that has to be redressed, the two countries ought to seek dialogue and not slap duties on each other.

"Doing so will cause trade volumes to decline, which means their economies will shrink," he told reporters on Tuesday (Sept 18). "This will have an indubitably large impact on other countries."

US President Donald Trump said on Monday he will slap new tariffs on US$200 billion (S$274 billion) worth of Chinese goods - on top of another US$50 billion that was targeted earlier. The new goods will be taxed 10 per cent more from next Monday, and this will be raised to 25 per cent from January next year unless both sides strike a deal.

China said it will not stand idly by and will respond in kind, even if Mr Trump has threatened tariffs on another US$267 billion in imports. US-China trade talks, which were set to take place next week, are reportedly in doubt.

The latest development will also delay trade talks between Japan's Economic Revitalisation Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer, which was slated for Friday (Sept 21). This is so that Tokyo can assess the impact of the latest round of tariffs, Reuters news agency reported citing a government source.

Japanese Prime Minister Shinzo Abe and Mr Trump, meanwhile, are also set to meet next week on the sidelines of the United Nations General Assembly session in New York.


Mr Trump has slammed Japan for exploitation as he cited Washington's US$68.9 billion trade deficit last year with the world's third largest economy.

Japan is fending off demands for a bilateral trade deal in the hopes of persuading the US to rejoin the multilateral Trans-Pacific Partnership agreement.

In May, Japan told the World Trade Organisation that it reserved the right to take retaliatory measures on 50 billion yen (S$611 million) of American goods. A month later, the US exempted certain Japanese products from steel tariffs of 25 per cent, though it is still threatening duties on imported Japanese cars and parts.

"Promoting global trade and investment will be key to developing the global economy," Mr Motegi said on Tuesday. "No country wants to be in the position of having to impose tit-for-tat tariffs."

Minister of Economy, Trade and Industry Hiroshige Seko also said that the decision to impose additional tariffs was "extremely regrettable".

"Given how complex and intertwined the global supply chain is, there may be adverse spillover effects in other parts of the world," he said, noting that many Japanese businesses are exporting parts to China, where these are then made into products that are exported to the US.

There are some 32,000 Japanese firms in China, the Foreign Ministry said.

Rand Corporation policy analyst Ali Wyne said in an opinion piece on Kyodo News that Japan must prepare for the prospect that such economic competition might spill over into the security domain, especially in the region.

"Because trade interdependence is one of the few phenomena that have compelled the two countries to exercise mutual restraint, the weakening of that dynamic could lead Beijing to challenge US national interests more forcefully," he said, noting that China could undercut Washington's sanctions campaign against North Korea or be more assertive in the South China Sea.