Trump 2.0 Would Be a Shock for Asia

trump 2.0 would be a shock for asia

About the author: William Pesek is a longtime Asia opinion writer, based in Tokyo. He is a former columnist for  Barron’s and Bloomberg and the author of Japanization: What the World Can Learn from Japan’s Lost Decades.

Ah, 2016 — the good old days when Donald Trump only wanted to tax Chinese imports 45%.

Now, with the former U.S. president telegraphing 60%-plus tariffs, it’s easy to see why Asia is in low-grade panic at the specter of a Trump 2.0 White House.

Look no further than Tokyo, as Japanese officials spit out ready-for-the-worst phrases that go viral in real time. Moshi-tora means “if Trump” returns; hobo-tora, or “pretty much Trump; maji-tora, or “seriously, it’s Trump;” and the dreaded kaku-tora, or “Trump confirmed.” (The phrases riff on the transliteration of Trump as “Torampu.”)

Japanese PTSD from Trump 1.0 remains acute. While China was the target of the most aggressive trade policies of Trump’s 2017-2021 presidency, export-driven Japan arguably sustained the most collateral damage. Ditto for Trump’s tariffs on steel and aluminum.

South Korea is nervous, too. Seoul officials so fear Trump will defeat Joe Biden in November that they are partnering with Tokyo. Bitter memories dating from Japan’s 1910 takeover can no longer match concern that Trump will make trade wars great again. They would return at a moment of maximum peril for President Yoon Suk-yeol’s economy.

Not that Biden has hosted a picnic for Asia’s biggest economy. His move on May 14 to quadruple to 100% the tariffs on Chinese-made electric vehicles, and to slap levies on advanced batteries, solar cells, steel, aluminum, and medical equipment, seem ploys to out-Trump the Donald.

Yet the threat Asia senses from Trump 2.0 is of a very different magnitude. China’s fragilities are growing less than six months before Americans go to the polls.

This isn’t a defense of Chinese leader Xi Jinping. The Xi era has been something of a lost decade for China’s development as a vibrant market-driven economy. Today’s China is less transparent than it was in 2012, when Xi took the helm. Its capital markets aren’t ready for prime time, giant state-owned enterprises still dominate, the currency isn’t fully convertible, and the property crisis is fueling deflation.

For Washington, the risk of a Chinese debt crisis is of the be-careful-what-you-wish-for variety. Thirty years on, Japan is still grappling with the fallout from its 1990s bad-loan crisis. Hitting China with supersized tariffs would compound its troubles. And if the world’s biggest trading nation enters an acute economic crisis, those problems will dwarf Washington’s current anxieties about Chinese strength.

The rest of Asia, of course, is on the frontlines of China risks. Hence concerns about Trump’s plans to remind China who’s boss, and about China’s own retaliatory moves.

A new round of “America First” policies could wreak havoc in Asia.

Along with his new tariffs, Trump plans to strip Beijing of “most favored nation” trade status. That could cause chaos for global supply chains, including surging costs of doing business.

Trump would almost certainly demand his next Treasury Department label China a currency “manipulator.” Japan could be at risk of a designation, too, considering the yen’s 9.7% drop this year is well ahead of declines in the yuan.

It seems a safe bet that Trump would cajole the Federal Reserve to slash rates immediately, perhaps sharply. In 2019, Chair Jerome Powell did the Fed’s credibility no favors by appearing to bow to Trump’s rate cut demands. At the time, Trump threatened to fire Powell for tightening credit.

The stakes are much higher today. Since Trump left office, the U.S. national debt topped $34 trillion and Washington lost a second AAA rating. When Fitch Ratings downgraded the U.S. last August, it cited the political polarization behind the Jan. 6, 2021 insurrection among the reasons.

None of these forces breeds confidence in the forces underpinning the globe’s reserve currency. Trump’s 1.0 team apparently considered a plan to devalue the dollar. Any attempt along those lines would go badly, fast.

The shockwaves would make the 2008 Lehman Brothers crisis seem quaint. The mere suggestion of devaluation might have Japan, China, and other top holders of U.S. Treasury securities moving to dump titanically large amounts of dollars, tanking world markets.

Asia also would see a bull market in security concerns in a second Trump term. Trump 1.0 tried to strong arm Japan, America’s best friend in Asia, into paying about $8 billion in annual fees to keep U.S. troops here. Trump has already said he expects to demand more from allies.

Tokyo and Seoul are also bracing for Trump’s next soirée with Kim Jong Un. Might Trump invite the North Korean tyrant to the White House? And once again look the other way as Pyongyang develops its nuclear capabilities in ways that imperil Tokyo and Seoul?

Perhaps the biggest worry is that Trump’s transactional nature might get the better of Washington’s top allies. In recent months, Japanese Prime Minister Fumio Kishida’s ruling Liberal Democratic Party has been angling for audiences with Trump to lobby against a potential “grand bargain” trade deal with China.

In a February appearance on Fox News, Trump said “I like President Xi a lot” and gushed that he’s a “smart, brilliant, everything perfect” leader. It doesn’t take a leap of the imagination to envision Trump pursuing a Group of Two pact at the expense of Japan, Korea, and other allies in Asia—even Taiwan.

Anyone who doubts these scenarios, unhinged as they sound, hasn’t been paying attention. Since the 1980s, businessman Trump has been scapegoating Asia for most of America’s problems. Back then, Japan was the economic boogeyman. Today it’s China. At least back in 2016, Asia didn’t live in daily fear of a rogue White House hellbent on economic revenge.

Trump 2.0 could be even scarier than that. And doesn’t Asia know it?

Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to [email protected].

OTHER NEWS

16 minutes ago

Kilkenny end Clare's defence of minor title with extra-time win

16 minutes ago

Canada can no longer be ‘naive’ about the ‘real’ threats it faces: Chief of defence staff

16 minutes ago

Chargers News: Jim Harbaugh Praises Chargers' Defense Ahead of Season

17 minutes ago

Orlando Pirates: Two new signings replace Monare and Makaringe

17 minutes ago

Major financial institutions cut ties with Santos’ Barossa gas project

17 minutes ago

Bryson DeChambeau explains bizarre reason why he puts his golf balls in SALT before playing

17 minutes ago

Gisele Bundchen and Joaquim Valente going strong! Couple put on affectionate display in Miami as they are seen for the first time together in two months - despite reports they 'split' due to 'stress of Tom Brady roast'

17 minutes ago

Carrie Preston Says Expect Surprises On Season Two Of “Elsbeth” And Names Her Dream Guest Star

21 minutes ago

ATP Finals Race to Turin: Record-holder Novak Djokovic faces an uphill battle to qualify

21 minutes ago

Australia’s first water cremation facility begins operating in Tasmania

21 minutes ago

Wong links PNG diplomacy to climate change in Pacific

21 minutes ago

24 Popular Trends Among Younger Generations That Older Adults Are Officially Sick Of Seeing

21 minutes ago

Steelers' Payton Wilson Already Learning From Patrick Queen: 'I'm Gonna Help This Team Win A Super Bowl'

23 minutes ago

Soccer-Buksa to lead Polish attack in place of Lewandowski against Dutch

23 minutes ago

Leigh-Anne Pinnock reunites with her former Little Mix bandmate Jade Thirlwall at Jamie McFarland's birthday bash at The Shard

23 minutes ago

Michael William Nash, 42, is identified as gunman who injured nine people at Rochester Hills splash pad

23 minutes ago

Video: How Trump's VP pick could be decided by Kamala Harris

23 minutes ago

Video: A surging IRS tax penalty is costing Americans billions - here's how to avoid being hit

23 minutes ago

Video: Violence erupts hours before England's clash with Serbia: Fans left bloodied as they skirmish with hooligan mob in German city as Three Lions supporters gather before game

23 minutes ago

Video:

26 minutes ago

Josiah Molden on UW

27 minutes ago

Kit Harington Once Left Rose Leslie In Tears With A Gross Prop

27 minutes ago

PLAYER RATINGS: Which Premier League star shone brightest for the Netherlands? What Dutchman was wasteful? And which Poland defender struggled in his head-to-head battle

27 minutes ago

Michael Cieply: Searching For The Jewish Soul In The Academy’s ‘Hollywoodland’

31 minutes ago

‘We’re excited’: arthouse hits draw young UK filmgoers to a summer of subtitles

32 minutes ago

Trying to Understand The National Media's Perception Of The Titans

32 minutes ago

Luis Diaz Scores And Assists For Colombia In Chaos Filled Bolivia Friendly

32 minutes ago

Seven Mpox cases confirmed in South Africa

32 minutes ago

SuperSport United and Gavin Hunt agree terms

32 minutes ago

Dubai Police adds Tesla Cybertruck to its fleet

32 minutes ago

Pep Lijnders targets transfer reunion with rising Liverpool star as triple Anfield exit takes shape

32 minutes ago

The role the DA's John Steenhuisen could take in the Government of National Unity

32 minutes ago

Meet England assistant Steve Holland who has been with Gareth Southgate for over a decade

32 minutes ago

U.S. Open 2024: The USGA has several special tributes in store to honor Payne Stewart on Sunday at Pinehurst

32 minutes ago

6 Things To Look Out For If You're Buying A Junkyard Engine

33 minutes ago

Is Slovenia v Denmark on TV? Kick-off time, channel and how to watch Euro 2024 match tonight

36 minutes ago

Heidelberg West death: Tributes for Melbourne man Ali Chaaban after he died in alleged street fight

37 minutes ago

Used EV price crash keeps getting deeper with 'premium' brand idea history

38 minutes ago

Nato in talks to put nuclear weapons on standby

38 minutes ago

Sasquatch Sunset review – brilliant bigfoot oddity is unexpectedly moving