Japan's auto industry won't survive the 4 years of Trump, so they will have to start shifting the production to the US but that alone won't be profitable due to high costs of labors and everything in the US. The hollowing out of Japanese industrial economy will follow. I did my maths to estimate the total losses of GDP will be immediately around 2-5% from the collapse of auto industry, while the long term damages in years can incur up to 50% of GDP if all supporting industries towards auto get fully dismantled due to Japanese automakers going bankrupt or becoming American companies.
I fear that the next President after Trump will keep the permanent tariffs on autos, steel, aluminum just like Biden originally went ahead of protecting the US solar industry with anti-dumping tariffs. Basically, the big boys in global companies are saying that Japanese automakers will be out of the club through giving the FU tariffs. China will dump their cars in any market outside of the US for coming years, so Japan won't survive the Chinese onslaught.
Thanks for the timely summary. Why are you so confident that the Japanese government wouldn't just threaten to do this, but would actually dump a significant portion of its $1+ trillion in US Treasuries?
Because it would be too disruptive of the world financial system, on whose stability Japan depends. And because Japan is not that irresponsible. Is a little saber-rattling possible depending on how far Trump goes? Possibly? But I don't expect anything too big. BTW, China has been steadily reducing its holdings of Treasury bonds since 2018 and has done so by a substantial amount, That has not been disruptive because it was not intended as a political act.
Scenario planners, earn your salary.
https://open.substack.com/pub/thecatalystexplorer/p/tariffs-on-tariffs-off-ceos-should?r=5irhlx&utm_medium=ios
Good. I hope Japan stays firm. Then it’s American consumers’ time to FAFO.
Japan's auto industry won't survive the 4 years of Trump, so they will have to start shifting the production to the US but that alone won't be profitable due to high costs of labors and everything in the US. The hollowing out of Japanese industrial economy will follow. I did my maths to estimate the total losses of GDP will be immediately around 2-5% from the collapse of auto industry, while the long term damages in years can incur up to 50% of GDP if all supporting industries towards auto get fully dismantled due to Japanese automakers going bankrupt or becoming American companies.
I fear that the next President after Trump will keep the permanent tariffs on autos, steel, aluminum just like Biden originally went ahead of protecting the US solar industry with anti-dumping tariffs. Basically, the big boys in global companies are saying that Japanese automakers will be out of the club through giving the FU tariffs. China will dump their cars in any market outside of the US for coming years, so Japan won't survive the Chinese onslaught.
Thanks for the timely summary. Why are you so confident that the Japanese government wouldn't just threaten to do this, but would actually dump a significant portion of its $1+ trillion in US Treasuries?
Because it would be too disruptive of the world financial system, on whose stability Japan depends. And because Japan is not that irresponsible. Is a little saber-rattling possible depending on how far Trump goes? Possibly? But I don't expect anything too big. BTW, China has been steadily reducing its holdings of Treasury bonds since 2018 and has done so by a substantial amount, That has not been disruptive because it was not intended as a political act.
Got it. Thanks for your succinct explanation.