US president Donald Trump stated Monday that “Japan, China, and other places are killing their currency,” calling the practice “unfair” and fueling concern that trade-war style tariffs might soon be focused on Tokyo. Suntory and Sony are two Japanese giants already making moves to stave off potential fallout.
While it’s unclear exactly what the US figurehead meant by accusing the Japanese and Chinese governments of “[killing] their dollar, their equivalent of the dollar, whatever,” one thing appears clear: Canada and Mexico will not be the only economies to face Trump trade war fallout.
Fiat currencies worldwide are struggling, and of course, the group with the strongest military typically has the “strongest” currency. From a debt-based perspective , neither the yuan, the yen, or the USD are in a position of solvency or strength. Nonetheless, preparations are being made by Japan-based companies to fend off failure in the case of a potentially damaging new tariff.
Japanese giants Suntory and Sony make provisions
Reuters reports Thursday (JST) that Japanese electronics behemoth Sony and multinational drinks company Suntory have begun building up supplies in the United States, with Sony increasing electronics and gaming division inventory. Suntory, for its part, has reportedly shipped tequila from it’s Mexico-based operations north of the border.
Trump’s comments from the Roosevelt Room of the White House on Monday have only exacerbated fears, with Japan’s government denying the Asian state is “devaluing” the Japanese yen. The US president also mentioned Honda moving production of its next Civic from Mexico to Indiana in the speech, saying: “Well, Honda is coming, and I told you about Apple, that they’re going to be starting to build massively here — $500 billion.”
Criticism of Japan may seem confusing at this juncture, as the nation’s prime minister, Shigeru Ishiba, has recently stated that the country will increase investment in the United States to an unprecedented $1 trillion dollars. This proclamation was made in the presence of Trump at a joint press conference following a Japan-US summit meeting in D.C in February. Ishiba also noted plans for Japanese automakers Toyota and Isuzu to build plants in America.
Trump supporters shift positions
Economic freedom and populist protectionism are butting heads in light of Trump’s trade rhetoric, as his mixed support base, some of whom even claim he is “libertarian,” struggle to hold their hodgepodge of mixed values in one place. On the one hand, classically liberal (libertarian) economists overwhelmingly favor free trade, as it tends to benefit everyone in an economy, due to the free flow of goods.
However, nationalist interests in supporters who typically view themselves as anti-communist or fascist, have them vocally supporting the 25% trade impositions on Canada and Mexico, which interestingly may be met with even more, retaliatory tariffs, forcing companies like Honda to once again move back to Mexico or the countries they initially fled.
Perhaps the most obvious explanation for the contradictory positions and confusing opposition to Japanese interests by Trump, is one that is age old: he’s just playing politics. Unfortunately, the fallout from such games is measured in real people’s lost livelihoods and even lives, when trade wars erupt into armed conflict. And even if Japan is not directly targeted with tariffs, it’s important to note that in a global economy, Mexico and Canada being slammed will still make things much harder for businesses with ties to those zones.
Whatever may unfold, Japanese businesses are on guard, with Reuters quoting senior Oxford Economics economist Norihiro Yamaguchi as emphasizing: “Corporates are now more aware that Japan could also be a target.”
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