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Image: picture-alliance/AP Photo/D. Zalubowski

Trump's Toyota threat

Julian Ryall Tokyo
January 11, 2017

Despite Donald Trump's tax threats against Toyota in a Twitter message, analysts believe the US president-elect will ultimately recognize the importance of a global free trade regime. Julian Ryall reports from Tokyo.


Officials at Toyota Motor Co. were quick to release facts and figures to rebut the suggestion by US President-elect Donald Trump that the automaker's plans to build a new manufacturing plant in Mexico will damage the US economy and that he will therefore impose a "big border tax."

Speaking at the North American International Auto Show on Monday, four days after Trump used Twitter to threaten to tax the largest car maker in Japan, the company's president Ako Toyoda emphasized that Toyota Motor has invested some $22 billion (20.8 billion euros) in the US in the last 60 years, has created around 136,000 jobs and will be investing an additional $10 billion (9.47 billion euros) in the country over the next five years.

The concern in Japanese boardrooms, however, is that a businessman with a reputation for ignoring convention and the facts may bring the same attributes to the White House.

"Companies are worried because they just don't know the direction that Trump's trade policies will take once he is in office," said Stephen Nagy, an associate professor of international relations at Tokyo's International Christian University.

Renegotiating trade deals

"It is clear that he is intent on renegotiating trade deals that are much more favorable to the US, meaning agreements that are on a bilateral basis instead of multilateral arrangements, like the Trans-Pacific Partnership," Nagy told DW. "Bilateral deals offer assymetrical advantages to the US purely because of the size of its national economy."

Japan and Japanese companies, on the other hand, prefer the multilateral approach. And with the 12-nation TPP all but dead in the water, and the North American Free Trade Agreement as another of Trump's targets, there is concern in Japan over which sectors might be the next focus of the incoming leader.

USA Akio Toyoda in Detroit
Ako Toyoda emphasized that Toyota Motor has invested some $22 billion (20.8 billion euros) in the US in the last 60 yearsImage: Reuters/M. Blinch

In an editorial on January 9, the Asahi Shimbun newspaper summed up Trump's Twitter missives as "blatant and unreasonable political intervention in corporate activity."

The paper pointed out that Trump's strong-arm tactics have already convinced air conditioner maker Carrier Corp. and automobile giant Ford Motor Co. to cancel plans to build plants in Mexico, claiming "he is using his influence based on the enormous power he will soon wield to apply unfair pressure on businesses.

"This is totally unacceptable behavior."

Moderating policies?

Yet analysts suggest that Trump is still playing to the crowd and that once in power, he may moderate his policies.

"It will be difficult for the new administration to simply erect trade barriers because the nation equally depends on imports," points out Martin Schulz, senior economist with the Fujitsu Research Institute.

"To support the domestic manufacturing sector, the US needs more exports and that means more investment, from both the US and foreign investors, as well as additional spending on infrastructure, to promote its production base," he told DW.

That need for investment is positive for Japanese firms, Schulz said, because Toyota and countless other Japanese companies have been investing huge amounts of money into the US since Ronald Reagan was president in the 1980s. In addition, Japanese corporations have a great deal of capital readily available and, unlike their Chinese counterparts, are established in the US, which - for the moment - makes them optimistic about their US investment plans.

A bigger problem would crop up "if the new US government decides to become more 'difficult' not just in its trade policies but also towards regulating foreign investors," Schulz said.

"The comments on Toyota sent a very difficult signal to any investor," he added. "Companies will have to watch very carefully during the next few months how Trump's policies take shape."

USA Treffen Donald Trump und Shinzo Abe
Japanese PM Abe appears to be relaxed on Trump's trade strategiesImage: picture-alliance/dpa/Cabinet Public Relations Office/Ho

'Interested in results'

Given his movements on other promises made during the election campaign, Schulz believes it is "very possible" that he will increase obstacles to international trade policies but be ultimately positive for investors in the US.

"He is, after all, a businessman and he has promised to make America strong again," he said. "He is interested in results and has to have the support of international investors. If he is not getting positive results, then he is likely to change his strategy."

Shinzo Abe, the Japanese prime minister, appeared to be relaxed on Trump's trade strategies after emerging from his meeting with Trump just days after his election victory professing his optimism for the outlook of US-Japan business ties.

And after an initial bedding-in period, Nagy believes Trump will largely come around to the importance of a mutually beneficial trade strategy.

"In the short term, I think there will be a lot of uncertainty - which will be good for the financial markets but less so for manufacturers looking to put plans into operation - but I'm more optimistic of stability over the mid- to longer term," he said.

"The rule of law that governs US business will serve to buffer the excesses of Trump, and I believe that he will soon come to understand the importance of global trade," he said. "And when it comes to Japan, specifically, a close relationship will help him in his dealings with China.

"That puts Japan in a relatively good position," he suggested.

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