Former Japanese PM surrendered to Trump on trade deal, economist says

The best analysis I’ve found of the prospect that Japan will give Donald Trump $550 billion—money that Trump can use to order the building of the Alaska LNG pipeline and other projects—comes from economist and author Richard Katz, who has been writing about the Japanese economy for more than four decades.

He contends that the now former prime minister of Japan caved to Trump’s demands and that it will be contentious when the Japanese public learns what he did.

“Defenders of Tokyo’s surrender to Trump argue that this was the only alternative to Trump’s tariffs on Japan continuing at 25%. But both the EU and Korea (tentatively) achieved tariff reduction without making concessions anywhere in the same ballpark. The EU is got giving Trump any government money; it simply provided a projection of what it expected private companies to do. Those companies will make the profits; there’s nothing about 90% going to the US. Trump is trying to coerce Korea into making the same deal as Japan, but it says it will not. Neither the EU nor Korea gave Trump permission to raise tariff rates if the reality failed to meet their projects,” he wrote.

U.S. Commerce Secretary Howard Lutnick says Trump will be able to tell the Japanese to pay for the Alaska pipeline, regardless of how much it costs.

Lutnick told Bloomberg that the Japanese government will give the $550 billion to Trump before the end of his term to be invested in any manner that Trump sees fit.

“Alaska pipeline, scale, $50 billion, $100 billion, Donald Trump wants to unleash the Alaska pipelines. The Japanese will finance it. And it’s great for America. It’s fantastic,” Lutnick said.

According to the Trump administration the $550 billion is what Japan’s former prime minister agreed to pay to “buy down” the tariff rate on Japanese exports to the United States. Instead of 25 percent, the U.S. will charge 15 percent.

The tariffs are a tax paid for by U.S. businesses and consumers, a tax that is making it more expensive to buy anything from Japan.

“So desperate was now-former Prime Minister Shigeru Ishiba to lower Donald Trump’s 25% tariffs on Japanese products to 15%, especially on automotive products, that he signed on to an incredible surrender regarding Tokyo’s promise for the government to invest $550 billion in the US over the coming three years,” Katz wrote on his Substack newsletter.

“The MOU has not been published yet, but Japan’s Cabinet Office provided reporters with printed versions in Japanese and English. It is full of ambiguities and omissions that make different interpretations almost inevitable. So, it is not hard to imagine Tokyo asserting that the MOU says X while Trump insists it means Y, accuses Japan of violating the terms, and then raises tariff rates,” he said.

“While the MOU states that it is ‘an administrative understanding . . . and does not create legally binding rights and obligations,’ Trump will certainly regard Japan’s concessions as binding,” Katz wrote.

“Given the minority status of the LDP/Komeito coalition, the incoming Prime Minister needs support from at least one opposition party. I suspect such parties would not want to be blamed for giving Trump an excuse to raise tariffs, but I also suspect that any party willing to comply would want to extract a high price, either affecting the terms of the MOU or some other issue, e.g., taxes. This could become contentious, and the public will become aware of how much Ishiba gave away.”