Pick Your Bully

Japan has a problem. On one hand, the US, Japan’s only security partner, is ready to impose a 24% tariff on all goods. On the other hand, there’s China, Japan’s largest trading partner, but they’ve gone to war against each other numerous times, barely getting along now. Both the US and China are known to act like bullies when they want another country to bow to their will. Having to choose one or the other could be a difficult task.

That’s why yesterday’s two-hour talks with Japan’s lead negotiator Ryosei Akazawa were critical. President Punk, for his part, praised the negotiations, saying on X, “A Great Honor to have just met with the Japanese Delegation on Trade. Big Progress!” But anyone with any sense knows that what Punk posts on social media and how he actually feels are often two different things.

Sure, Punk’s statement holds a modicum of relief. He didn’t come out of the meeting angry or ready to pull the plug on the whole relationship. Akazawa was tight-lipped, though. The only thing he said as he left the White House was that they did not discuss currency values, which, again, is likely a good thing. The two sides will meet again in two weeks.

Everyone in the world is watching the talks with Japan as they likely signal how the US is going to handle any trade agreement ahead of the 90-day reprieve from high tariffs taking effect. Everyone expects Punk to demand some kind of concession before lowering or possibly dropping tariffs, and where Japan is concerned, that concession is likely to include some form of cutback in trade with China.

Tokyo was long reluctant to clamp down on lucrative exports of semiconductor-making equipment to China in the face of US pressure. Business lobbies in Japan are vocal advocates of stable relations with Beijing and next week a delegation of senior Japanese government officials is due to travel there.

Not helping the matter any is the fact that China’s Xi is on a tour of Asian Pacific nations, looking to create an “Asian Family” of trading partners. Vietnam has already made a deal with China, and he travels to Korea next. If the US is not careful with their negotiations, they could lose much of the influence they have in the region.

Treasury Secretary Scott Bessent has said he envisions reaching agreements with military ally Japan and other US partners to harness a collective effort to apply economic pressure on China. Should the US tie its military relationship with Japan to any trade concessions, the deal becomes difficult for Japan to refuse.

Japan is expected to offer the US a broad deal as it urges Punk to drop the 24% duty on Japanese goods. In a February meeting with Punk, Prime Minister Shigeru Ishiba promised to buy more American liquefied natural gas and raise investment in the US to $1 trillion. We’ve already seen Japanese car makers move to increase the number of vehicles they produce in the states.

In next week’s meeting China is likely to present Japan with an offer of greater trade if they stand up to the US and refuse our demands. Should they take that offer, military operations in Okinawa and elsewhere could become a valuable trading piece.

All we know now is that Japan is between a rock and a hard place. China and the US are their two largest trading partners, but keeping them both happy is likely impossible.