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Why Is America Undercutting Japan?

At a time when the United States is asking its allies to help it counter China, its wasteful, inefficient industrial policies are making it harder for them to comply. Rather than undercutting its “friends” with subsidies and protectionist trade barriers, America should be focusing on pro-growth innovation and labor-market policies.

TOKYO – Until 2017, America’s trade policies were reasonably well aligned with its strategic objectives. The United States was the world’s largest economy, with unrivaled military power, and its alliances with European countries and others bolstered security and underwrote prosperity for all. It also provided global leadership through bodies like the World Trade Organization, ensuring a common rule-of-law framework to support economic growth and cross-border exchange around the world.

Then came Donald Trump, who ushered in an era of US protectionism, unnecessarily alienating many friends and allies. His successor, Joe Biden, has attempted to repair some of the damage, but he has not reversed many key elements of Trump’s trade policies.

This is well illustrated by US policy toward Japan, a crucial American ally in Asia. Japan has long depended on the US for its security – an arrangement that dates to its defeat in World War II. Since Abe Shinzō’s premiership, Japan has been building up its military and security capacities, and demonstrating a greater willingness to defend its allies and strategic interests in the region – including with respect to Taiwan – but it still relies on the US security umbrella. Japan is also heavily dependent on trade, and it is a key country in both Asia and the global economy. What happens in Japan thus has implications for everyone. And now that China is flexing its muscles, Japan has become as important geopolitically as it is economically.