Trump Tariffs Throw Cold Water on Wage Increases by Smaller Japanese Firms Says Japan Chamber of Commerce and Industry Chairman

Yomiuri Shimbun

01-05-2025

The Yomiuri Shimbun
Ken Kobayashi
The tariff measures taken by U.S. President Donald Trump raises concern about efforts by small and midsize companies in Japan to increase wages, said Ken Kobayashi, chairperson of the Japan Chamber of Commerce and Industry.
The following is excerpted from an interview with Kobayashi conducted by Yomiuri Shimbun Staff Writer Shinsuke Ishiguro.
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We are concerned about what will happen to the U.S. economy as a result of the tariff policy imposed by U.S. President Donald Trump.
For the past several decades, the world has been globalized with the United States at the center, and a trade system has been established in which products are manufactured where costs are lowest and sold where costs are highest.
The United States, with its voracious appetite for consumption, has been importing and buying goods in large quantities from all over the world. Although Washington has a trade deficit, it has been able to attract investment from around the world and make up the deficit through its financial account balance.
Raising tariffs will cause price hikes in the United States and cool consumption. If the United States sneezes, it's not surprising for the world to catch a cold. It is questionable whether Mr. Trump was fully aware of this environment.
Mr. Trump has set a goal of reviving U.S. manufacturing industries through his tariff measures. But in the process of globalization, the U.S. workforce has been polarized into a top and bottom tier, and the pool of reliable skilled workers is thinning. The U.S. government has also adopted a policy of excluding immigrants who might be able to join the workforce, and it may be difficult to revive the manufacturing industries during his term.
Japanese firms may also move to increase production in the United States to avoid tariffs. But it will be difficult to secure local workers, and this is not realistic from a standpoint of economic rationality.
What worries us most about the impact on small and midsize enterprises in Japan is that a series of tariff measures may dampen the trend toward wage increases and passing their mounting costs along to their prices that has been accelerating over the past several years.
In particular, tariffs on the automobile industry, which is one of Japan's key industries and has a broad related industries, are a very serious problem. Major automakers are competitive and may be able to compete in the United States even if they raise prices there.
However, we are concerned that they may put pressure on small and midsize companies to cut costs to make up for what they cannot cover by raising prices alone.
In this year's shunto spring wage negotiations, even small and midsize firms raised wages by nearly 5% in response to the labor shortage. However, since the Trump tariffs have increased unpredictability, they may not be able to increase by what they're able to. The firms' wage increases and passing of mounting costs along to their prices could backslide.
We will appeal to large companies not to ask small and midsize firms to cut costs. If small and midsize firms can't secure funds to run their businesses, we will work with the government to address the situation.
At the first round of the Japan-U.S. negotiations, which was attended by Mr. Trump, he reportedly mentioned the cost of stationing U.S. troops in Japan. If the talks have rough going in the future, Japan might feel temptation to make concessions in the security area to achieve benefits on tariffs. If such a thing happens, there will be no way to stop it.
The biggest issue for Japan is how to deal with tariffs, and anything that impedes free trade must be eliminated. In the Japan-U.S. negotiations, it is essential for Japan not to link security and trade issues.
Ken Kobayashi
Kobayashi graduated from the University of Tokyo's Faculty of Law. He then joined Mitsubishi Corp. in 1971. After serving as senior executive vice president and in other posts, he became president in 2010 and corporate advisor in 2022. He became chairperson of the Japan Chamber of Commerce and Industry in 2022 and works to improve the environment for small and midsize enterprises. He is 76.