By Jean-Marc F Blanchard and C Lawrence Greenwood
Under former US president Joe Biden, the United States and Japan strengthened their multifaceted and multi-realm collaboration on economic security through a plethora of means. As Donald Trump re-enters the presidential office, the durability of these efforts will be tested, with his administration likely to reshape — though not entirely abandon — this critical partnership.
Trump appears to find little value in institutionalised, bilateral dialogues or multilateral institutions, preferring one-to-one dealmaking. Still, it is likely that the United States will continue with the former under Trump, though he may substantially trim the large number of US–Japan partnerships while embracing new forms and adopting a different tenor.
As for multilateral arrangements, there is reason to believe that Trump may terminate the Indo-Pacific Economic Framework. Even so, he will probably continue to support Quad security cooperation with Japan, India and Australia, especially since he relaunched it in his first term.
Trump’s well-known fondness for tariffs could torpedo US–Japan cooperation, particularly if Japanese business is hit by a tariff across-the-board or on auto exports from Mexico where Japanese automakers are heavily invested. Another possible roadblock is Trump’s demand for a substantial increase in Japanese support for the US military presence in Japan. As the host nation support agreement between Japan and the United States comes up for renewal in 2026, this could distract from broader cooperation.
But at this early stage in the administration, Trump appears to appreciate the value of its relationship with Japan and has refrained from echoing his earlier episodic criticisms of Japan’s trade surplus or supposedly deficient contribution to the security partnership.
Trump’s team will likely support the economic security partnership with Japan, but again, tariffs loom large as a threat. Key national security-related appointees such as Secretary of State Marco Rubio, National Security Advisor Mike Waltz and Secretary of Treasury Scott Bessent — all China hawks — see the value of cooperation with Japan in dealing with China.
Some appointees, including US Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick and White House trade and manufacturing counsellor Peter Navarro, are strongly supportive of tariffs. But they all would welcome greater Japanese foreign direct investment (FDI) and manufacturing in the United States, though with a clear preference — as the Nippon Steel caseseems to show — for greenfield over acquisition.
Administration appointees like Secretary of Energy Chris Wright and Transportation Secretary Sean Duffy are not disposed towards electric vehicles, wind and solar, or actions to address climate change. This could be problematic for Japanese companies who have invested heavily in green technologies but could also boost cooperation with Japan in areas like liquified natural gas, geothermal and nuclear power.
This suggests the Trump administration may ‘encourage’ Japanese FDI that promotes manufacturing, creates jobs and advances US goals with respect to critical minerals, energy security and semiconductors. They might also put increased pressure on Japan to decouple from China.
Bilateral economic security cooperation under the US CHIPS and Science Act no longer has a bright future. Trump was critical of the massive subsidies for chip foundries in the United States. Even so, they will continue cooperation on semiconductor export controls, supply chain diversification and research and development (R&D) — albeit to different degrees given, for example, Japan’s dislike of the very broad export controls that Washington supports nowadays.
Cooperation amid the Inflation Reduction Act tells a similar story. Continued US–Japan cooperation on critical minerals could depend in part on what Trump decides to do with the Act’s US$7500 tax break for electronic vehicle purchases.
Indeed, the US–Japan Critical Minerals Agreement was concluded to allow Japanese companies to use this incentive, a move that was harshly criticised by the United Auto Workers union. Still, both countries share an interest in reducing dependence on the China-centred critical minerals supply chain and are likely to want to continue joint investment efforts for third country mines.
Too much has changed for the United States and Japan to rely on the personalistic diplomacy prominent in Trump’s first term. To sustain the economic security partnership, both sides need to identify common interests and ensure initiatives are win-win, lest they never take root or wither.
Common interests are clear in energy production and diversification, critical minerals independence, advanced semiconductor development and semiconductor supply chain diversification. These common interests create the basis for more Japanese FDI in the United States as well as joint R&D initiatives. Both countries should work on adopting flexible legal and regulatory regimes that lubricate the way for more FDI and R&D by the other.
The United States should consider ‘whitelisting’ Japanese FDI so that investment reviews by the Committee on Foreign Investment in the United States become less burdensome, uncertain and costly. Both sides further need to recognise the costs of decoupling from China and — in this vein — promote measures supporting supply chain diversification while minimising measures that limit or delay them.
About the authors:
Jean-Marc F Blanchard is Founding Executive Director, Mr. & Mrs. S.H. Wong Center for the Study of Multinational Corporations in Campbell, California.
C Lawrence Greenwood is Chair of the Japan Society of Northern California in San Francisco and a former career diplomat.
Source: This article was published by East Asia Forum