Fireside Chat on the Future of International Trade対談：「国際貿易の将来」

Key Concepts

• Tariff Policy Shifts: Dramatic changes in US tariff policy, particularly since 2017, leading to increased average tariff rates and volatility.
• US-China Trade War: The impact of tariffs imposed on China and retaliatory measures, significantly altering trade flows.
• Trade Diversion and Reorientation: How tariffs cause countries and businesses to shift sourcing and trade partners to avoid higher costs.
• Globalization 2.0 / Multilateral Drift: A shift from hyperglobalization to a more complex, potentially fragmented global trade landscape, not necessarily deglobalization.
• De-risking and Supply Chain Optimization: Businesses re-evaluating and adjusting global value chains in response to geopolitical and economic uncertainties.
• Transactional Trade Approach: A move away from multilateral WTO rules towards more bilateral or plurilateral agreements.
• MFN (Most Favored Nation) Status: The erosion of MFN principles in recent trade agreements.
• Impact on US Economy: Debates on the actual economic impact of tariffs on US consumers, businesses, and overall growth.
• WTO Reform and Future of Trade Governance: Discussions on the role and potential reform of the World Trade Organization in the current trade environment.
• New Economic Zones and Frameworks: Ideas for creating new global trade structures to address imbalances and foster free trade.

Summary of the Fireside Chat on the Future of International Trade

This session, a fireside chat on the future of international trade, featured insights from Masayuki Hyodo, Chairman of the Board of Directors of Sumitomo Corporation, and Merit Janow, a CJEB faculty member and former dean. The discussion was moderated by David, who also presented initial data on US trade policy shifts.

US Trade Policy and Tariff Volatility

David began by presenting data illustrating a significant change in US tariff policy since 2017. Prior to the trade war with China, average US tariffs were around 1%. Following the imposition of tariffs on China in 2018-2019, coupled with steel and aluminum tariffs, US tariff rates more than doubled to approximately 2.9% by January of the current year. The presentation showed considerable volatility, with average US tariff rates peaking around 23% in April and then falling to about 16% by May. There was a projection that threatened tariffs could push the average to 30-32% in August, while recent agreements with Japan and the EU at around 15% might lead to a slight decrease.

Key Data Points:

• Average US tariffs pre-2017 trade war: ~1%
• Average US tariffs by January of current year: ~2.9%
• Peak average US tariffs (April): ~23%
• Average US tariffs (May): ~16%
• Potential average US tariffs (if threatened tariffs implemented): ~30-32%
• Agreements with Japan/EU: ~15%

Impact on US Imports and Trade Patterns

The increased tariffs have had a profound impact on US imports, particularly from China. In 2017, China accounted for nearly a quarter of all US import value. By 2024, this share had fallen to 14%, and in the first five months of the current year, it dropped to 10%. Digging deeper, Chinese imports have fallen by 50% in the first five months, bringing their share to around 7-8%.

This decline in Chinese imports has been accompanied by a rise in imports from other countries. Mexico, South Korea, and Vietnam have seen increased import shares, while imports from Japan, Canada, and other developing countries have also risen. This indicates a clear decoupling of the US economy from China and a reorientation of trade patterns to circumvent tariffs.

Key Data Points:

• Share of US imports from China (2017): ~24%
• Share of US imports from China (2024): ~14%
• Share of US imports from China (first 5 months of current year): ~10% (actual value down 50%, share around 7-8%)

Panelist Perspectives on Globalization and Trade Policy

Masayuki Hyodo (Sumitomo Corporation): Hyodo san emphasized the need to view tariff negotiations and their conclusions from both short-term and long-term perspectives. He noted that while there might not be significant immediate changes, uncertainty is haunting the global economy, leading to "front-running" or stockpiling by businesses. From a long-term view, existing global supply chains will be affected and businesses will need to optimize them considering new tariff conditions. This optimization process will take time, ranging from two to five years. He also highlighted the "side effect" of China diverting products to other markets, creating new competition and changing the "rule of the game" in third countries.

Merit Janow: Janow described the current era as "globalization 2.0," moving away from "hyperglobalization." She cautioned against using the term "deglobalization," as trade patterns have shifted dramatically. Manufactured trade growth has plateaued, while services trade has grown twice as fast, with the Asia Pacific region being a major hub. She attributed the significant changes in US-China trade to a combination of economic and geopolitical factors, not just tariffs. She observed that while there hasn't been large-scale divestment from China, there has been incremental investment elsewhere and a focus on "de-risking." She noted a lack of strong evidence for widespread regionalization, nearshoring, or friendshoring.

Janow also pointed out a significant break from past US trade policy, with the current administration using legal and policy tools like Section 301 and Section 232 in new ways, and employing instruments like the International Emergency Economic Powers Act (IEEPA) for reciprocal tariffs. She believes that a baseline of 10-15% tariffs will likely become US practice, with ongoing uncertainty. She questioned the economic impact of these tariffs, noting the resilience of US consumption despite short-term market volatility. She also highlighted the end of Most Favored Nation (MFN) treatment as a significant development, with trade agreements being made on a non-MFN basis, eroding WTO rules and potentially creating new frictions. She observed a surge in new trade negotiations globally, excluding the US, with Europe being a significant driver.

David (Moderator): David expressed concern about the depreciation of the dollar, suggesting it makes Americans poorer. He noted that importers are paying more for goods, with no decline in foreign prices. He also presented his research on the revenue implications of tariffs, estimating that they would add at most 1.3% to US tax revenues, a "tiny impact" on budget deficits. He posed the question of whether the US economy can "barrel through" a period with 10-15% tariffs.

Winners and Losers in the New Trade Landscape

When asked about potential winners, Hyodo san stated that the "winners are the movers" who are flexible and wise enough to adjust their entire value chains to be competitive under the new rules. He sees any tariff adjustment as a "new business chance" and advises companies to readjust investment targets and establish new working strategies to make their portfolios suitable for new value chain rules.

David presented a slide showing a surge in US imports in categories that experienced no or small tariff increases (blue and green), contrasting with the sharp decline in Chinese imports (red). This indicates that sourcing is now being driven by tariffs, not just efficiency.

Merit Janow expressed concern about the impact on the US economy, predicting uneven effects across sectors. She believes American consumers will eventually feel the impact of increased prices.

The Future of Trade Negotiations and the WTO

The discussion shifted to the future of trade negotiations and the role of the WTO. David characterized the current approach as moving away from the WTO towards a more "transactional" system.

Merit Janow described the current situation as a "multilateral drift" rather than a return to the cascading deglobalization of the 1930s. She believes the WTO is deteriorating unless it can become more constructive and implement its reform agenda. She sees a world experiencing fragmentation, with pressure on companies to ensure interoperability and operate locally. She suggested the possibility of multiple "spheres" (US, China, Europe) operating simultaneously. She found the Digital Economic Partnership encouraging as an area for cooperation.

Hyodo san acknowledged the WTO's age and its inability to address globalization-induced disparities. He suggested enhancing the global system to ease imbalances and disparities that lead to trade disputes. He mentioned a proposal for "new economic zones" where consensus on adjusting imbalances could be reached. He stressed Japan's fundamental strategy of seeking free trade under the rule of law and encouraging all countries, including the US, to participate constructively. He believes that while competition is necessary, global free trade is essential for the prosperity of over 8 billion people.

Conclusion

The session concluded with a consensus that the global trade landscape is undergoing significant transformation driven by shifts in US trade policy, geopolitical factors, and the need for businesses to adapt their supply chains. While there is uncertainty and potential for fragmentation, there are also opportunities for innovation and the development of new trade frameworks. The future of multilateral institutions like the WTO remains a key question, with calls for reform and adaptation to address contemporary challenges.