An interview with Toshiya Tsugami, a visiting researcher at the Japan Institute of International Affairs, by Yuta Koga.
Question: How do you see the U.S.’s “America First” policy?
Toshiya Tsugami: The policy is driven by a widening gap between the rich and the poor. The U.S. enjoyed an exceptionally high economic growth rate in the 20th century and the gap between salary hikes and growth in investments was unlikely to widen. But in the 21st century, globalization is widening the [rich-and poor] gap again.
People who are frustrated with the gap have political power and are supporting President Donald Trump. The emergence of President Trump is a result (of the gap), not the cause [of the gap.] I don’t think this structure can readily change. So I’m pessimistic about free trade.
Q: Why do you think China maintains a tough stance on trade?
Tsugami: Trump may be thinking that China will soon wave the white flag and the U.S. will end up sweeping to victory. If that is the case, he fundamentally lacks an understanding of China. In China, someone who ineptly caves into foreign pressure is historically called a “traitor.” If China gives in because of economic hardship, Xi Jinping would lose political power at home.
Q: Do you think the trade war between the U.S. and China will continue to intensify?
Tsugami: There are two scenarios for China. The first is that it takes a nonchalant attitude by neither pushing back against nor bowing to Trump’s sanctions. Americans can’t live without imported goods. So imposing additional tariffs is the same as imposing heavier taxes on Trump’s own people. If Trump imposes additional tariffs worth several hundred billion dollars on China, the American economy will also face a serious situation within a year. In the U.S. there may be a backlash against the trade war.
The second is that China marshals its entire society to fight the U.S. by fomenting nationalism and boycotting American products. The first scenario is the better of the two. But I’m not sure whether China can take such a long-term view.
Q: What should Japan do?
Tsugami: Japan has no choice but to keep making utmost efforts, though it’s not clear whether it can thoroughly protect the free trade system. Japan needs to call on the U.S. to return to the Trans-Pacific Partnership (TPP) agreement and continue warning China that continuing its autocratic behavior will result in its isolation in the international community.