Securing and Economizing the US-Japan Partnership Under Trump 2.0
With Donald Trump’s return to the White House, the future of the US-Japan economic security partnership hangs in the balance. While Trump’s first term saw notable progress in this area under President Biden, his administration’s approach is likely to shift, bringing both opportunities and challenges.
Trump’s preference for bilateral deals and skepticism towards multilateral organizations suggests a potential reshaping of existing collaborations. While partnerships might be trimmed, new forms of cooperation are possible. The fate of the Indo-Pacific Economic Framework (IPEF) remains uncertain, but the Quad security partnership with Japan, India, and Australia seems safe, given Trump’s earlier revival of this alliance.
Navigating Potential Roadblocks
Several potential roadblocks exist for US-Japan economic security cooperation under Trump. His penchant for tariffs could negatively impact Japanese businesses, particularly if broad-based tariffs are implemented or auto exports from Mexico (where Japanese automakers have heavy investments) are targeted. A significant demand for increased Japanese support for the US military presence in Japan, especially as the host nation support agreement comes up for renewal in 2026, could also complicate matters.
However, it’s too early to predict a complete unraveling of the partnership. Trump has so far refrained from criticizing Japan’s trade surplus or its contribution to the security partnership, signaling a potential commitment to preserving this important relationship.
Shifting Policy Priorities
Trump’s appointees bring diverse perspectives. While figures like US Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick, and White House trade and manufacturing counsellor Peter Navarro are strong proponents of tariffs, they also welcome increased Japanese foreign direct investment (FDI) and manufacturing in the United States, particularly in greenfield projects.
Appointees like Secretary of Energy Chris Wright and Transportation Secretary Sean Duffy, who are less supportive of electric vehicles, renewable energy, and climate change action, could present challenges for Japanese companies heavily invested in these areas. However, this stance might foster cooperation in sectors such as liquefied natural gas, geothermal, and nuclear power.
Areas of Continued Cooperation
Considering these conflicting viewpoints, the Trump administration appears to favor Japanese FDI that boosts US manufacturing, job creation, and fosters progress in critical minerals, energy security, and semiconductors. Pressure on Japan to decouple from China may also intensify.
Despite Trump’s criticism of the CHIPS and Science Act’s subsidies for US chip foundries, semiconductor export controls, supply chain diversification, and R&D collaboration are likely to continue, albeit with differing viewpoints on the scope of export controls. The situation with the Inflation Reduction Act, particularly regarding the $7,500 tax break for electric vehicle purchases, poses a similar dilemma.
The US-Japan Critical Minerals Agreement, aimed at allowing Japanese companies access to the tax break, faces criticism from the United Auto Workers union. However, both countries share a strong interest in reducing China’s dominance in the critical minerals supply chain and are expected to continue joint investments in third-country mines.
A Call for Strategic Alignment
Both the U.S. and Japan must recognize that successful economic security cooperation requires shifting from personal diplomacy towards a more strategic and predictable approach. To sustain this vital partnership, both sides must identify shared interests and strive for win-win outcomes.
Promising areas for future collaboration include energy production, critical minerals independence, advanced semiconductor development, and supply chain diversification. These shared goals could encourage more Japanese FDI in the United States and joint R&D initiatives.
To facilitate this, the U.S. should consider “whitelisting” Japanese FDI to streamline the Committee on Foreign Investment in the United States (CFIUS) review process. Both countries should also acknowledge the costs of decoupling from China and prioritize measures that diversify supply chains without unnecessarily hindering them.
The US-Japan relationship remains a cornerstone of regional stability and economic prosperity. By actively engaging in constructive dialogue and finding common ground, both countries can ensure that the economic security partnership flourishes in the years to come.
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