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Asahi Shimbun
3 hours ago
- Business
- Asahi Shimbun
INTERVIEW/ Takeshi Nakano: Trump tariffs fueling inevitable collapse of world economic system
U.S. President Donald Trump's high tariffs levied on imports are tossing the world around and leading to irreversible global changes, according to Takeshi Nakano, an economics commentator. He said the ramifications of Trump's tariffs go much further than the immediate consequences of lost sales in the U.S. market. In a recent interview with The Asahi Shimbun, Nakano, known for his books including 'TPP Bokokuron' (The Trans-Pacific Partnership free trade arrangement would ruin the nation), said Trump is seeking a unilateral realignment of the international economic system, a trend that can no longer be stopped. Excerpts of the interview follow: *** Question: How do you see the Trump administration's tariff policy? Nakano: The important thing about the latest tariffs is that they are being imposed on (almost) all countries of the world. In particular, exorbitantly high tariff rates were set for China. So, it's no longer about bilateral trade friction between Japan and the United States. Products from around the world, which are losing the U.S. market, will flow into other nations. That will strengthen deflationary pressure and could trigger scrambles for markets, trade wars and tariff wars among countries other than the United States. Q: What do you think lies in the backdrop of the Trump tariffs? A: The United States has continued to import vast amounts of products, one-sidedly, from the rest of the world and has suffered, as a consequence, from trade deficits and current account deficits. Japan, which has relied on foreign demand, is one of the countries that have taken advantage of an international economic system that is dependent on the United States. All this has engendered the problem of a global imbalance. And the United States is saying that it can no longer withstand that. Japan should take an approach that is totally different from the traditional framework of bilateral talks. The country should increase its domestic demand by taking large-scale fiscal stimulus measures based on international cooperation and call on other countries to refrain from imposing retaliatory tariffs. AIMING FOR WEAKER DOLLAR Q: What is your take on nations' talks with the United States? A: The essential purposes of the Trump tariffs consist of weakening the dollar and tapping into tariff revenue to realize tax cuts in the United States. If Japan were to eliminate its 'nontariff barriers,' that would certainly please the United States, but it would not directly lead to lower (U.S.) tariff rates. What Washington is engineering here is not a trade war but a currency war. Trump is planning to do something that would be tantamount to the 'Nixon shock' of 1971 and the Plaza Accord of 1985. Q: Do you think Trump's policy emerged out of the blue? A: No. A blanket surcharge of 10 percent was imposed on imports by President Richard Nixon during the Nixon shock. That is the same rate as the 'baseline' part of Trump's 'reciprocal' tariffs. Trump cited the U.S. International Emergency Economic Powers Act as the grounds for imposing additional tariffs. That law is successor to the 1917 Trading with the Enemy Act, which was used as the grounds for the import surcharge during the Nixon shock. Trump is doing a repeat of that. Q: Do you think this trend will remain? A: Yes. A collapse of the global economic system appears inevitable even when Trump is no longer there. The burden on the United States has reached its limits, and the trend for going 'America First' did not change even under the administration of President Joe Biden. This is an irreversible trend that will continue into the future. Q: What will be the consequences of a merger between Trump and techno-libertarians (who seek libertarianism through advances in technology)? A: The Biden administration sought to break up the tech industry and regulate cryptocurrencies in an effort to rectify disparities. That infuriated the techno-libertarians, who all at once came to support Trump. Caps on political donations have been found unconstitutional and eliminated in the United States. That is allowing billionaires to do whatever they wish to do. With the huge resources of the tech industry flowing into the Trump camp, the Democrats have no chance of winning any longer. Q: What do you think will become of the United States? A: Properly speaking, Washington should not only be raising tariffs but also be devising industrial policies to bolster the manufacturing industry and taking measures for fixing the disparities. Trump, however, remains liberalistic when it comes to matters other than tariffs and cutting fiscal spending. The United States has become a nation that can no longer fix its own disparities. Trump's backers will realize, sooner or later, that they have been betrayed. When that happens, people in the United States will no longer have any idea who to trust. That could plunge the country into a state of civil war. *** Born in 1971 in Kanagawa Prefecture, Takeshi Nakano graduated from the University of Tokyo's College of Arts and Sciences before joining the Ministry of International Trade and Industry, the predecessor to today's economy ministry. The expert in political and economic thought was also an associate professor with the Kyoto University graduate school. Nakano has authored numerous books, including 'TPP Bokokuron,' 'Kiseki no Keizai Kyoshitsu' (The Miracle School of Economics), 'Sekai wo Senso ni Michibiku Globalism' (Globalism leads the world to war) and 'Jiyu Boeki no Wana' (Pitfalls of free trade). (This article is based on an interview by Yoshikatsu Nakajima and Senior Staff Writer Daisuke Igarashi.)
Canada Standard
5 days ago
- Business
- Canada Standard
Column: 3 facts U.S.-China talks in Geneva reveal
The Geneva meeting was helpful, but it did not make all problems go away. Continued struggles may still lie ahead. China has shown in Geneva that if a bully is coming to get you, better fight back. by Shao Xia The recent China-U.S. high-level meeting on economic and trade affairs in Geneva delivered results that went beyond expectations and allowed the world a brief sigh of relief. Many analysts anticipated that the United States would come back to some semblance of rationality, but perhaps not this quickly. This once again proves three simple facts. INJUSTICE ALWAYS DOOMED For decades, the United States has been one of the biggest beneficiaries of the global trade architecture. But now, it is casting itself as the victim of this very system, as if its enormous debt and economic problems were created by the rest of the world. But Washington finds little sympathy for its claims. At home, California Governor Gavin Newsom initiated legal action against federal tariff policies. Twelve states decried the violation of the Constitution by the federal government. U.S. retail giants Amazon and Walmart wanted to show "tariff costs" on product labels, only to be blamed by the White House as taking a "hostile and political act." Globally, the United States' key allies are standing up for their economic interests. Canada responded with 25 percent tariffs on about 30 billion U.S. dollars worth of U.S. goods. The EU, while accelerating free trade negotiations with the Middle East, Latin America and Asia, is discussing with China minimum pricing for EVs. Japan and South Korea are bolstering their domestic industries to reduce reliance on U.S. markets. Washington's attempt to dismantle the global trade order and its growing penchant for zero-sum diplomacy is fueled by an urge to externalize domestic crises. These tactics may bring short-term gains, but will erode international trust in the United States and accelerate de-dollarization and the broader disengagement from the country. PEACE COMES TO THOSE WHO DARE TO FIGHT The Geneva talks reaffirmed a point made a long time ago by Chairman Mao Zedong: "If unity is sought through struggle, it will live; if unity is sought through yielding, it will perish." Historical precedents abound. More than 70 years ago, China broke the myth of U.S. military invincibility by putting up a heroic fight during the War to Resist U.S. Aggression and Aid Korea. A more recent case in point is the three-year legal and diplomatic battle against the politicized extradition case of Huawei CFO Meng Wanzhou. Some other countries had painful lessons. Japan suffered from prolonged economic stagnation in the 1980s following its acceptance of the Plaza Accord and semiconductor restrictions. France lost its industrial champion Alstom due to the United States' "long-arm jurisdiction." Should one fight or give way to coercion? The right choice is clear, but not easy to make. In Geneva, China defended not only its interests, but also fairness and justice in global trade. As The Atlantic noted, for every country and company threatened by the United States, China offers a lesson -- "Standing up does not mean that you win, but giving in guarantees that you lose." STRENGTH ALWAYS THE FOUNDATION Real leverage comes not from rhetoric, but from economic resilience. China always prioritizes economic stability as a key target of macro policy. In response to rising external pressure, it has rolled out sector-specific and firm-specific relief measures to support businesses and anchor market expectations. Long before the 2018 trade tensions, China had been pressing ahead with structural reforms -- promoting a more unified domestic market, quality growth and trade with various partners. Now, the Association of Southeast Asian Nations has overtaken the United States as China's largest trading partner, while China's exports to the United States have dropped from 19.2 percent in 2018 to 14.7 percent in 2024. U.S. think tanks believe China has spent the past six years quietly preparing for a long-term struggle -- investing in domestic innovation, localizing key industries, and expanding access to alternative markets. In fact, these are not just measures for a rainy day. China's commitment to reform and opening up is a long-standing one. They go back decades. The United States is a major player in the global economy. But it should not overestimate its influence. It is only 13 percent of global trade. Over 7.6 billion people live outside its borders. A Bloomberg model suggests that if trade with the United States were entirely cut off, 30 percent of its partners could recover within a year, and more than half would do so within five years. Many in Europe now believe the world can forge a more inclusive and diversified trade architecture -- without relying on the United States. Meanwhile, Washington elites are growing increasingly disconnected from the people they are supposed to serve. Faced with rising inflation and fractured supply chains, ordinary Americans are told to simply "bite the bullet." Beyond empty slogans, few practical relief policies exist -- unless one counts "backyard chicken farm" as a realistic national strategy. The Geneva meeting was helpful, but it did not make all problems go away. Continued struggles may still lie ahead. China has shown in Geneva that if a bully is coming to get you, better fight back. Editor's note: The author is a commentator on international affairs, writing regularly for Xinhua News, CGTN, Global Times and China Daily. The views expressed in this article are those of the author and do not necessarily reflect the positions of Xinhua News Agency.
The Star
28-05-2025
- Business
- The Star
Only a dollar slump can fix US trade deficit
IF the United States is to significantly reduce or, whisper it, eliminate its trade deficit, the dollar will probably have to weaken a lot. How much is unclear, though, as history shows large dollar declines are rare and have unpredictable consequences for trade. Reducing the US trade deficit is the key goal of President Donald Trump's economic agenda because he believes it reflects decades of other countries 'ripping off' America to the tune of hundreds of billions of dollars annually. Stephen Miran, chair of the Council of Economic Advisers, published a paper in November titled 'A User's Guide to Restructuring the Global Trading System' in which he argued that the dollar is 'persistently over-valued' from a trade perspective. 'Sweeping tariffs and a shift away from strong dollar policy' could fundamentally reshape the global trade and financial systems. If a weaker exchange rate is the Trump administration's goal, it is on the right track, with the greenback down nearly 10% this year on the back of growing concerns over Washington's fiscal trajectory and policy credibility as well as the end of 'US exceptionalism' and the 'safe haven' status of Treasuries. But it is good to remember that a 15% fall in the dollar during Trump's first term had no impact on the trade deficit, which remained between 2.5% and 3% of gross domestic product (GDP) until the pandemic. Making a dent in the US deficit will therefore require a much bigger move. The weight of history Reducing the trade deficit will be a challenge, eliminating it without a recession, a historic feat. The United States has run a persistent deficit for the past half-century, as insatiable consumer demand has sucked in goods from around the world and voracious appetite for US assets from overseas has kept capital flowing stateside. The only exception was in the third quarter of 1980, when the US posted a slender trade surplus of 0.2% of GDP, and trade with the rest of the world almost briefly balanced in 1982 and 1991-92. But these periods all coincided with – or were the result of – sharp slowdowns in US economic activity that ultimately ended in recession. As growth shrank, import demand slumped and the trade gap narrowed. The dollar only played a significant role in one of them. In 1987, the trade gap was a then-record 3.1% of GDP. But it had almost disappeared by the early 1990s, largely because of the dollar's 50% devaluation from 1985-87, its biggest-ever depreciation. That three-year decline was accelerated by the Plaza Accord in September 1985, a coordinated response between the world's economic powers to weaken the dollar following its parabolic rise in the first half of the 1980s. But that does not mean large depreciations always coincide with reductions in the trade deficit. The dollar's second-largest decline was a 40% fall between 2002 and mid-2008, just before Lehman Brothers collapsed. But the US trade deficit actually widened throughout most of that period, peaking at a record 6% of GDP in 2005. While it had shrunk by more than three percentage points by 2009, that was due more to plunging imports during the Great Recession than the exchange rate. These two episodes of deep, protracted dollar depreciation stand out because over the past 50 years, the dollar index has only had two other declines exceeding 20%, in 1977-78 and the early 1990s, and a few other slides of 15% to 20%. None of these had any discernible impact on the US trade balance. Deficit to 'vanish'? The US administration is correct that the dollar is historically strong today by several broad measures. Given that President Trump and Treasury Secretary Scott Bessent seem intent on rebalancing global trade, pressure on the greenback looks unlikely to lift any time soon. But how much would the dollar have to fall to whittle away the yawning trade deficit, which last year totalled US$918bil, or 3.1% of GDP? Hedge fund manager Andreas Steno Larsen reckons a 20% to 25% depreciation over the next two years would see the deficit 'vanish'. Deutsche Bank's Peter Hooper thinks a 20% to 30% depreciation could be enough to 'eventually' narrow the deficit by about 3% of GDP. 'This means that a significant reversal of the roughly 40% appreciation of the dollar in real (price-adjusted) terms against a broad set of currencies since 2010 could be sufficient to get the current deficit back to a zero balance,' Hooper wrote last week. History suggests this may be challenging without a severe economic slowdown. But that's a risk the administration seems prepared to accept. — Reuters Jamie McGeever is a columnist for Reuters. The views expressed here are the writer's own.
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Nikkei Asia
28-05-2025
- Business
- Nikkei Asia
Plaza Accord 'drama' didn't lead to lasting reform: ex-Japan financial diplomat
TOKYO -- On Sept. 22, 1985, the Group of Five nations of Japan, the U.S., the U.K., France and West Germany announced what came to be known as the Plaza Accord to reduce the value of the dollar. But Toyoo Gyoten, who was involved in the negotiations as director-general of the International Finance Bureau at Japan's Ministry of Finance, told Nikkei that he does not believe the agreement went far enough to change the international order for currency. Gyoten later served as vice minister of finance for international affairs.
Free Malaysia Today
28-05-2025
- Business
- Free Malaysia Today
What Trump gets right about China
US president Donald Trump's embrace of tariffs has been met with considerable criticism, and for sound reasons. But Trump's diagnosis of the global trading system – and, specifically, its impact on US manufacturing – may not be entirely wrong. The problem, instead, is the treatment: rather than using a chainsaw, which would probably kill the patient, he should reach for a scalpel. The existing international order, including the global trading system and the dollar-based monetary system, were established in Bretton Woods, New Hampshire, near the end of World War II. With Europe in ruins, the US enjoyed undisputed economic dominance, including in manufacturing. In 1948, four years after the Bretton Woods conference, the US accounted for more than half of all goods produced worldwide. But one product of that conference – fixed exchange rates – turned out not to be all that good for the US, as it contributed to the precipitous decline of America's share of global manufacturing value-added, from 55% in 1953 to 24% in 1970. US president Richard Nixon's 1971 decision to delink the US dollar from gold mostly stabilised this share, which then remained roughly consistent for three decades. But it also turned the US from a surplus country into the world's largest deficit country, as it fuelled the rise of Japanese manufacturing. The 1985 Plaza Accord – whereby the US convinced the rest of the G5 (Japan, West Germany, France, and the UK) to help weaken the dollar – succeeded in shrinking America's external trade deficit. But these gains were eroded in 1994, when the North American Free Trade Agreement went into effect, and obliterated after 2001, when China's accession to the World Trade Organization opened the floodgates for Chinese goods to pour into the US market. In 2001-21, the ratio of US manufacturing exports to imports plummeted from 65% to 45%, and America's share of global manufacturing value-added declined from 25% to 16%. So, when Trump complains that Chinese exports have contributed to the decline of US manufacturing, he has a point (the extent to which reducing Chinese imports today would revitalise US manufacturing is another matter altogether). But no one has paid a higher price for Chinese overcapacity than China. Children are 'super consumers'. The more children a household contains, the more it spends. But decades of fertility-control policies have left China with relatively few children. In 1982, three years after the one-child policy was introduced, the country's total population-to-worker ratio stood at 2.2, reflecting a relatively large number of dependents for each worker (aged 20-59). By 2010, the ratio had plummeted to 1.6, well below the international average of 1.8-2.2. While this ratio is now rising again in China, it is being driven primarily by an increase in the number of elderly, not children. As households shrank, so did their incomes – from 62% of GDP in 1983 to 44% of GDP today. The result has been low and falling consumer demand. Since 1983, household consumption has fallen from 53% of GDP to just 39% of GDP, compared to nearly 70% in the US. Weak domestic consumption left China dependent on a manufacturing surplus – which reached US$1.86 trillion, or 10.5% of GDP, in 2023 – to provide jobs. Because the US not only has a huge and voracious consumer market, but also issues the world's primary reserve currency – and thus provides the world with trade surpluses and liquidity – American overconsumption became the natural counterweight to Chinese overcapacity. This relationship, which historian Niall Ferguson and economist Moritz Schularick dubbed 'Chimerica,' initially seemed symbiotic. But it quickly morphed into something monstrous, as it simultaneously destroyed US manufacturing – I was warning of a US-China trade war as far back as 2009 – and perpetuated the imbalance between production and consumption within China. In other words, China's demographic collapse led to overcapacity. China's government has few options for addressing its demographic crisis. Its attempts to loosen fertility rules – replacing the one-child policy with a two-child and then a three-child limit – failed miserably, because low household incomes meant that families could not afford to have more children. The government seems to be pinning its hopes on an 'engineer dividend,' as China boasts more engineering graduates than the rest of the world combined. But college graduates typically find jobs in the services sector, which accounts for only 46% of Chinese employment. When other countries reached China's current tertiary enrolment rate, their service sectors provided 70-80% of jobs. Little wonder that youth unemployment is skyrocketing in China, and the number of new marriages – the backbone of fertility – is plummeting. By imposing sweeping tariffs on America's trading partners, Trump risks severely weakening – or even destroying – the global trading system. Since it is China's trade surplus that perfectly mirrors America's trade deficit, any effort to revive US manufacturing should start there. Unfortunately for Trump, the only real solution is to boost China's fertility rate, and that demands rapid progress in raising Chinese household incomes – something no tariff can achieve. Yi Fuxian, a senior scientist at the University of Wisconsin-Madison, spearheaded the movement against China's one-child policy. The views expressed are those of the writer and do not necessarily reflect those of FMT.
