By Megumi Udagawa
The president of a superpower naming certain companies to attack them in public used to be unheard of. Although the Japan-U.S. summit, which many companies had worried about, appeared to have ended amicably, the ominous situation remains unchanged. How should Japanese companies respond to the bombardment of “Trump tweets” unleashed by the U.S. administration?
In the predawn hours of Jan. 21, the president and directors of a Japanese company all gathered at the company’s conference room, nervously watching President Donald Trump’s inaugural address. Tension was high because they needed to know quickly what he would say, how this would affect their operations in the U.S., and how to deal with it. At that exact moment, the same thing was happening in many corporate head offices and hotels in Tokyo.
Just two weeks before the inauguration, Toyota Motor was suddenly attacked by Trump regarding its plan to build a new production plant in Mexico. While Toyota did not scrap the plan, it announced new plans to invest a total of $10 billion (approximately 1.14 trillion yen) in the U.S. over five years. Many companies were terrified by this move that appeared to be bowing to Trump’s pressure, so they were closely watching his every word and action.
Takaaki Umezawa, chairman of the Japan subsidiary of the U.S. business consultancy A. T. Kearney who is well-versed in economic affairs in both countries who appears frequently on Japanese TV, says: “While politicians used to produce results through behind-the-scenes negotiations, Mr. Trump has started to employ completely new political tactics.” Companies are facing a business environment that is unpredictable by conventional wisdom.
It is widely believed that Trump will continue his direct attacks that interfere even with management decisions.
Umezawa observes, “With many of the big-name companies Trump targeted since his election campaign appearing to be cozying up to him, his next targets cannot help feeling the pressure to show obedience. Trump must have gotten a taste of victory.”
Are there ways companies can protect themselves from the Trump administration?
Takaki Nakanishi, analyst and CEO of Nakanishi Research Institute who is familiar with the world auto market, points out, “When the U.S. President singles you out for criticism, you cannot possibly ignore or resist him. Companies will have to respond by making rational decisions, giving top priority to their stockholders’ interests.”
Nakanishi says that considering Toyota’s investment volume so far, $10 billion is “not outrageous.” But if companies pledge enormous investments incompatible with their scale of operations, they may be sued by stockholders. The only option is to get through the situation by making appropriate decisions.
Crisis management consultant Kuniyoshi Shirai had contended that there was no need to make major changes to risk management even when the UK decided to leave the EU last summer. However, he now warns that the Trump administration’s policies, such as the renegotiation of NAFTA, may bring about drastic changes in the business environment. Companies’ existing systems, such as their network of raw material suppliers or assembly plants, may become dysfunctional.
Shirai stresses that one strategy companies should pay attention to is to “act cautiously in order not to become targets.” For example, they should not include concrete figures for investments and other matters relating to the U.S. in their mid- and long-term business plans for the next three to five years. If they announce plans to set up new U.S. subsidiaries and eventually have to withdraw the plans, this will only attract attention and make them easy prey. Shirai says they should wait and see for at least one year.
Furthermore, when a leading company is attacked, the business sector as a whole should deal with the situation collectively. “Even though Toyota was singled out, the real target is Honda, Nissan, and the entire Japanese auto industry. When Toyota was attacked, the industry should have united and taken the initiative in lobbying the Japanese government to deal with the crisis collectively. If they are united as one, the other party will have to listen. The best way is to unite and make themselves a tough adversary.”
Umezawa predicts that agriculture is “certain” to become a target in the future. The United States is one of the biggest agricultural countries in the world. U.S. livestock industry groups are already demanding the liberalization of the beef and pork markets and calling for negotiations for a Japan-U.S. free trade agreement (FTA) at an early date. There is even an opinion that the attack on Toyota was meant to be a stepping stone for expanding the sales of U.S. agricultural products.
Shirai expects advanced medical treatment, telecommunications, steel, and robotics to be highly possible targets in the future, apart from agricultural products. These are growth industries that are the U.S.’s forte, where it hopes to reap generous profits.
The future seems to be so bleak, but are there no bright spots?
Umezawa notes that many people in U.S. universities and the academic and research fields are critical of Trump. He points out, “This is also an opportunity to recruit talented people to Japan to set up industrial sectors that are competitive internationally.” There are now entrepreneurs and researchers who want to leave the United States. Apparently, some Japanese companies are developing concrete plans to recruit them to Japan.
Nakanishi emphasizes, “While we are facing challenges now, there is no need to think negatively.” Japanese companies learned lessons on the importance of harmony and balance during the era of trade frictions in the 1980s and 1990s. They expanded local production and were able to become global companies as a result. “They will become stronger if they overcome the present hardships. This crisis should also be seen as an opportunity.” (Abridged)