JRI Research Journal;Vol.8 No.5,
Reconsidering the Reorganization of Supply Chains due to the Trump Tariffs ― As the US bets its economic future on tariffs, it may instead create a movement by other countries to ‘de-risk’ from it. ―
Minoru Nogimori
Summary
On April 2nd, US President Trump announced a significant increase in tariffs. The President and his cabinet members have taken a hardline stance on trade, with tariffs as the central pillar in their plan to reduce the trade deficit and protect key industries. They have become increasingly uncompromising in their pursuit of these goals, and have hit out not only at China, which many countries are becoming increasingly concerned about, but at all countries.
Looking at the details of the Trump tariffs that have been implemented, it is clear that the administration's priority is to reduce the trade deficit and protect key industries. The ‘reciprocal tariffs’ are set in a way that is linked to the trade deficit, and pressure is being increased on all countries with a trade deficit friendly or not. Ten industries, including automobiles, have been designated as industries to be protected, with duties being implemented or considered on a product-by-product basis.
The implementation of US tariff policy, akin to gambling, is having a huge impact on the global economy yet the Trump administration has shown no sign of changing course. With negotiations unlikely to result in a significant reduction in levies, countries will inevitably have to lower the priority of their trade relations with the US. Looking ahead, companies from many countries are expected to strengthen their ‘local production for local consumption’ in the US to an extent, but the high cost of manufacturing in the US is expected to be a major issue. In addition, governments around the world will likely place greater importance on regional economic partnership agreements such as the CPTPP, and will be forced to de-risk from the US.
Japan too must consider its economic ties and not only de-risking from China, but also de-risking from the US. Japan need s to reconsider restructuring its supply chains by strengthening its ties not only with developed countries such as Europe and Australia, but also with the Global South, including India and Southeast Asia.