What is Trump’s broader strategic intent with Japan, Philippines trade deals?

Key Concepts:

• US-Japan Trade Deal
• US-Philippines Trade Deal
• Tariffs (15% for Japan, 19% for Philippines)
• Strategic Competition (US vs. China)
• US Trade Policy in Asia-Pacific
• Trans-Pacific Partnership (TPP)
• Economic Frameworks vs. Trade Deals
• Japanese Auto Industry in the US
• Economic Dependency
• Truth Social Announcements
• Credibility of US Trade Agreements
• US Allies in Asia

1. US Trade Deals with Japan and the Philippines: Strategic Intent

• Jared Moonshine argues that the US approach to economic engagement in Asia under the Trump administration lacks strategic coherence.
• There's bipartisan agreement in the US on being tough on China, but less consensus on applying the same pressure to allies like Japan and the Philippines.
• These allies are considered crucial for the US to succeed in the era of strategic competition with China.
• The announced tariff reductions are seen as welcome by many in the strategic community, who believe it's essential to keep these countries on the US side.
• Moonshine emphasizes that the announcements are preliminary, and the details are crucial ("the devil's in the details").

2. Recalibration of US Trade Policy or Campaign Optics?

• Moonshine suggests the trade deals could be both a recalibration of US trade policy and a move for campaign optics in an election year.
• The US has been relatively absent from trade and investment in Asia for some time.
• Donald Trump withdrew the US from the Trans-Pacific Partnership (TPP), which was intended as a rules-based alternative to China's economic order.
• The Obama administration was slow in finalizing the TPP, and the Biden administration didn't revive it, opting for an economic framework instead.
• Trump's actions have accelerated the US's engagement to a certain point, and there are political dimensions at home that make foreign policy wins a priority.

3. Market Reaction and the Japanese Auto Sector

• Japanese auto stocks surged on the news of the tariff reduction.
• The Japanese auto industry's relationship with the US is significant.
• While initially unwelcome in the 1980s, Japanese cars are now integral to the US car market.
• Many Japanese auto manufacturers have invested in manufacturing in the United States.
• Despite this, there's still substantial trade exposure between Japan and the US.
• The 15% tariff reduction could provide balance and stability to the US-Japan economic relationship.

4. Philippines: Industries and Economic Dependency

• The Philippines, as a US ally, is a major source of services and goods trade.
• Services include skilled labor and outsourcing of customer service centers.
• Goods trade involves manufacturing.
• The US aims to keep the Philippines within its orbit and prevent it from becoming more economically intertwined with China.
• The 19% tariff reduction is part of this broader strategy.

5. Impact of Truth Social Announcements on Credibility

• Announcing trade deals via Truth Social, rather than through traditional diplomatic channels, affects the credibility and perceived permanence of these agreements.
• Vietnam, for example, believed it had a trade deal with the Trump administration but saw the terms changed at the last minute by the president.
• President Trump's approach to trade with Canada and Mexico also demonstrates unconventional behavior.
• Economically, the US is somewhat at the whim of President Trump's daily sentiments.
• However, from a security and military perspective, the US shows more continuity across administrations.

6. Conclusion

The US trade deals with Japan and the Philippines are complex, driven by strategic competition with China, domestic political considerations, and economic factors. While the tariff reductions are welcomed by some, the lack of detail and unconventional announcement methods raise concerns about the credibility and long-term stability of these agreements. The impact on specific industries, particularly the Japanese auto sector and the Philippines' service sector, remains to be seen, pending further details and implementation.