Research Institute of Economy, Trade and Industry's latest seminar reveals that Professor Yasuyuki Todo (RIETI Program Director and Faculty Fellow) presented evidence-based strategies for responding to the second Trump administration's tariff policies. According to IDE-GSM simulation models, Trump tariffs' impact on Japan's GDP is projected at a 0.2% increase, attributable to Japan's low export share to the US and trade diversion effects as China's US exports shift to Japan.
As Japan's response measures, first, relocating production bases to the US and making US investments is necessary, but manufacturing tends to hesitate on investments due to policy uncertainty, making Japan-US government cooperation to eliminate uncertainty crucial. Second, expanding international intellectual networks is essential, with the US seeking new innovation partners amid US-China decoupling presenting an opportunity. TSMC's Kumamoto invitation exemplifies successful "open industrial policy," with face-to-face joint research and talent development leveraging diversity becoming important.
Third, supply chain expansion with the Global South is necessary. Japanese companies have not resolved their China dependence and have not advanced into the Global South. As China expands influence through the Belt and Road Initiative, Japan needs to strengthen Global South relationships through private investment expansion, enhanced risk assessment, flexible ODA utilization, and realistic responses to human rights and environmental issues.
The Research Institute of Economy, Trade and Industry recommends that responses to protectionist policies should prioritize supply chain diversification and innovation-based countermeasures, implementing policies based on past experiences responding to economic coercion from China.