No nation, said Benjamin Franklin, was ever ruined by trade. This insight is clearly lost on President Donald Trump, who appears willing to blow huge piles of Benjamins proving one of America’s founding fathers wrong.
Benjamins, of course, are US$100 bills. And Trump’s tariffs on steel (25%) and aluminum (10%), and others yet to come, will cost South Korea and Japan loads of them. Trump absolutely believes trade is ruining the American economy – killing jobs, wages and the collective spirits of his 325 million people. Hence his move to reopen a Korea-US trade deal in place since 2012 and renege on what would’ve been history’s biggest, the Trans-Pacific Partnership.
Trump is dead wrong. The biggest threats to US jobs are technologies and automation rendering entire career sets irrelevant. Yet as Trump seeks to save Americans from ruin, he’s threatening to deliver plenty of it on the economies of staunch allies Korea and Japan.
With friends like these…
This thought has surely crossed Shinzo Abe’s mind in Tokyo. No world leader has prostrated himself before The Donald more enthusiastically than Japan’s prime minister. Abe’s calculation: Tokyo’s reliance on Washington’s security guarantees makes friending Trump a necessary evil.
That has backfired in three ways since January 25. On that day, Trump’s Treasury secretary, Steven Mnuchin, ended the US’ 23-year-old strong-dollar policy, sending the yen sharply higher and threatening Japanese growth. Trump’s tariff gamble, on March 1, caught best-buddy Abe completely unawares. So did Trump’s rash decision last week to meet North Korean leader Kim Jong-un without preconditions or progress on denuclearization.
Even though the target of Trump’s escalating trade war is China, the biggest collateral damage will be sustained by US allies
South Korea’s President Moon Jae-in, just 308 days into his tenure, has been more cautious toward America’s tweeter-in-chief, and wisely so. He faces a more complex geopolitical balancing act. Not only must Moon navigate Kim’s provocations, but also Korea’s role in a proxy fight between Washington and Beijing. It hardly helps that Moon is also dueling with Abe about World War II controversies such as military sex slaves.
Korea spent much of 2017, after all, paying the price for welcoming US missile-defense systems. Xi Jinping’s China retaliated by slowing tourism to Korea to a trickle and erecting visa barriers for K-pop stars. Lotte stores on the mainland were shuttered and Hyundai’s auto sales cratered. Moon’s team spent the rest of the year dealing with Trump’s trade-deal renegotiation team.
In April 2017, Trump derided the Korea-US pact, one initiated by fellow Republican George W. Bush, as “a horrible deal.” Trump still threatens to scrap it altogether “unless we make a fair deal. We’re getting destroyed in Korea.” For Trump and his zero-sum worldview, that means rebalancing the pact decisively in America’s favor. That puts Seoul, which also relies on the US security blanket, in a near-impossible position.
Walking over allies to engage the enemy
Moon, of course, is proving he’s got some game. The success of his Pyongyang outreach efforts has both Trump and Abe playing catch up. Tokyo is now scrambling to arrange an Abe-Kim summit to keep up with The Donald.
Yet the bond between Moon and Trump, just like the one between Abe and Trump, will probably come down to the Benjamins. Even though the target of Trump’s escalating trade war is China, the biggest collateral damage will be sustained by US allies Brazil, the European Union, Japan, South Korea and others. Canada and Mexico, meanwhile, could be one early-morning Trump Twitter rant away from losing their exemptions.
Trump claims ‘America First’ doesn’t mean America last. What it does mean, though, is that Washington’s allies don’t matter much. Over the weekend, Trump tweeted: “The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum. If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!”
Funny how Trump has nicer words for Vladimir Putin – and sometimes Kim – than America’s most vital allies across the Atlantic. But then Abe and Moon are already well-schooled in the Trumpian worldview that free trade is the enemy.
If nothing else, it’s a wakeup call – a reminder that, at least until 2020, America will be more grifter than friend and that Asia’s economies must look elsewhere for trusted partnerships. With friends like that, indeed.