Globalization Redefined: How the New Tariff Wars are impacting Globalization
Yeah. Dr. Kikuchi. Yes. Okay. Yeah. We are almost um coming to the time. Uh there is some update about Professor Murata. um that he had to rush to the hospital but he was keen to even join from there. I don’t know how but whether he can or cannot I’m not very sure. So um if he’s able to join uh it will be a what do you call uh a bonus for us I guess. Okay. But um maybe we should uh start the session um because he has shared the me his presentation or his message uh to uh to us um through a presentation. So we will see how it goes. Yeah. And u so uh with your permission I will start. Yeah. Can I just ask who are the main participants of this seminar? Okay. So we have all the type of people who are who are both alumni of this institute as well as students. Yeah. And professors from this institute also are there in the p in the audience. Plus uh we have a wide range of uh um people from various walks of life including uh industrialists uh academic uh other students from outside our college uh and so on. So it’s a wide audience and we will also be looking forward to their questions. So um what I will try and do is I will first uh introduce um the topic as well as the speakers both of you. Yeah. And um then uh you will get about 15 minutes uh each um if he’s not joining you may take a slightly longer time um to uh give uh perspective about this topic. Yeah. Um and this will be followed by some questions uh which I will moderate. Okay. And the last section will be a Q&A. Yeah. from the audience. Yeah. So we will go with that as the structure. Yeah. Um so with your permission I will start. Yes please. Yes. So ladies and uh gentlemen very good afternoon uh to good afternoon good evening to those of you who are joined from India, Japan, Singapore and Europe. and a very good good morning to those of you who have joined us from the US. Um my name is Si Pratnam and I am the chief operating officer of MIGSC at IM Bangalore. MIGC stands for Mizu India Japan study center and this is a center of excellence at IM uh Indian Institute of Management Bangalore uh which is dedicated to fostering the collaboration between India and Japan across all the dimensions academia industry as well as the policy makers and of course society. We are in delighted to welcome you all to MIGSC’s 13th uh webinar in the panel discussion series and 34th webinar in the overall uh speaker plus panel uh format. So considering the the the origins of this u uh webinar series um as I was explaining minutes before uh the format is u having four parts. First I will set the context for the webinar followed by u the panelists themselves giving an overview of the topic uh for a few minutes for 15 to 20 minutes each. This will be followed by um a discussion between uh uh moderator which is me and the panelists and finally we will have audience uh Q&A. Uh so if you are in the audience and you have some questions or thoughts uh please um keep putting it as and when it occurs to you. it will be addressed in the last section of this webinar. Let me uh start with a very brief introduction about our center. As I explained, MIGSC is a co center of excellence at IM which was uh to bring in a close connect between academia, industry and government of the two countries and um the focus is basically to strengthen uh India and Japan bonds by promoting uh linkages between academia, industry, policy and the societ. society in general. Let me introduce uh to you now the two panelists who who will be one of them is already there uh Dr. Kikuchi and the other panelists would also probably join u because he had to he had a medical emergency and had to go um to the hospital. uh but he was kind enough or keen enough to show that he would like to be there in this webinar. Let us uh play it by the year as a time goes. Um I will introduce both the speakers. Uh of course uh Dr. uh Tommo Kikuchi is a leading uh authority on international macroeconomics and he is a director of uh the institute of uh Japan in the global economy at uh Vaseda University which is a leading uh university among the in Japan with prior uh faculty appointments of Dr. Kikuchi in top institutions including uh the National University of Singapore and Korean Korea University as well as uh MIT. He was a visiting uh professor there and Kio University of course within Japan and he brings together an unmatched regional insight and also a a global perspective on uh topics of uh macroeconomics. His uh research combines both rigorous theory as well as uh real world policy uh perspectives and his work has appeared in premier economic journals such as the journal of uh uh economic theory and the journal of money, credit and uh banking. He is a very trusted voice in economic policy circles and he serves as a in editorial boards as well as regularly advises on issues of uh intersection of uh trade, finance and uh regions of uh the uh globe. Briefly the second panelist professor Shujiro Urata he again Japan’s very respected economist in the field of international trade and economic integration. He is a professor emmeritus at the same university wasa university and he holds very senior advisory role at rii jce and eay jit jetro and he is currently serving as the president of uh east Asian economic association with advanced degrees in in Stanford as well as distinguished career includes positions at the World Bank and Brookings institution and he has shaped very key discussions on trade and development across Asia and also beyond Asia. He has extensive publications span global value chainsme developments regional trade frameworks and making him a sort of a go-to expert on economic architecture of uh East Asia and also the evolving landscape of globalization um across the world. We are indeed lucky to have such an imminent set of panelists uh to discuss this very hot and topical issue today. We are hoping that professor Urata whether directly or indirectly will be able to join this otherwise we will have him again on another forum. Um but we will have uh the pleasure and privilege of uh professor Kikuchi uh for this session as regards the webinar itself. Let me take a few minutes to set the context uh and give an overview of the topic uh and why we have chosen this particular topic and of course this panel the everybody we are all aware of these resurgence of uh tariff wars in 2025. Um, and I think this signals a decisive redefinition of globalization, so to speak, because what was once characterized by liberalized trade amongst countries, open markets and also integrated uh supply chains is now giving way to a very fragmented politicized and securitydriven global economy which is a very different ballgame altogether from what it used to be even a year before the escalating US triggered trade conflict and the extension of punitive tariffs to even traditional allies has triggered ed a global retreat from multilateralism and is accelerating the shift towards what we can now term as selective globalization. In this new phase of selective globalization, we will have to explore what is reshaping and how is it going to reshape the foundations of global trade and um for example the imposition of uh 25% uh tariffs on the Japanese auto industry. This has created a uh disrupted the core pillar of Japan’s uh export-led economy over last almost four and a half five decades and is affecting the manufacturing logistics and even sectorwide profitability of many of these companies uh of Japan. But I think the similar stories abound in all other countries in including of course India uh and other developing countries our neighbors on both sides broadly. Therefore I think the tariff environment is distorting uh trade flows. It is driving uh supply chain realignments and it is forcing companies to reassess our their own global operations. Input costs are rising and investment confidence is waning and access to foreign markets is becoming um less open and more uh politicized. All this turmoil which is happening around us is fragmenting the economy, global economy into blocks which are competing with each other not necessarily on the economic front alone and also the rulebased uh trading system is getting undermined particularly for smaller and developing nations economies but also for all econ economies including powerful economies like Japan. And this webinar will try and examine this hot and topical issue. How tariff wars are not just economic events but they are structural shifts that are fundamentally redrawing the map of globalization with long-term consequences for trade for investment and even for geopolitical alignment between uh nations. Now let us seek the views of the panelists um starting with professor Kikuchi on the state of economic impact of tariff wars implications for countries that are overly dependent on exports but also countries which are developing and a future outlook for global trade architecture. as a whole. So, Dr. Kikuchi, can you please start? Okay. Um, thank you uh Mr. Ratnam for the kind introduction and uh laying down today’s topic excellently. Um, thank you. Uh first I would like to thank the Mizuo India Japan Study Center at IMB for inviting me to talk on the pressing issues that make the hotline every day. Uh I’m expecting to participate in this panel alongside Professor Urata whom I respect very much. uh professor urata is a role model for those of us in Japan to study international economic relationships. I hope he will be able to join us later today. Otherwise, the pressure is all on me. So, I hope I don’t disappoint you. I’m a macroeconomist with interest in how the global economy affects individual countries development. So my comments today will be at the macro level. um as I don’t have expertise in any industry or sector. Let me first talk about how I understand the intention of Trump’s tariff policies. President Trump’s objective is to solve the twin deficits. Trade and fiscal deficits of the United States. Twin deficits of the United States started to emerge after the end of the bread and earth system in 1971. We know his argument that other countries are getting richer at the expense of the US. In this respect, uh, President Trump has been remarkably consistent. If you watch his interviews during the 80s, he argued as he does today. The difference is that back then his main target was Japan and today it is China. Why does Mr. Trump think that solving the twin deficit is vital for the United States? It sounds like a bad idea, especially because the world trade has grown tremendously under liberal economic order and many countries have benefited from expanding international trade. But that’s exactly his point. He thinks that even though imposing tariffs to all countries is a negative sum game, the United States is stronger relative to others in a less liberal world. And I have to say he’s probably right on this point given the resources and the military capacity that the country has. But here is the problem. Can we just move from one steady state to another? From today’s position of the US to the one before 1970s? My answer is no. The adjustments that the households, farms and governments must make for this transition is too much and too painful in the US as well as in the rest of the world. So that attempt is most likely to fail. Let me give you another perspective. The very reason why the US dollar has continued to be the world’s reserve currency after the collapse of the bread and earth system in 1971 is that the US has become the largest importer and provided its currency for a medium of exchange, a store of value and a unit of account globally. We can argue about the pro and cons of having the world’s reserve currency, but wishing the twin deficits to go away and at the same time wishing the US dollar to remain the world’s reserve currency is schizophrenic. It is like living in two separate realities that are actually connected. For this reason, what Trump is doing is confusing and will most likely undermine the long run interests of the United States. First, it is not clear if his tariffs lead to reduction in trade deficits of United States. Second, even if they do, it will be at the cost of consumers in the United States. Surely countries like Japan will invest more in the US but at the expense of efficiency and consumers in the US again will eventually have to pay the cost for the world economy. It will mean lower demand and companies will try to find new markets. Facing all these troubles, Japan will not retaliate but will seek compromises with the US. But at the same time, Japan will try to strengthen the trade relationship with the rest of the world, for example, the U, EU, and Latin American countries. CPTP, RC and MEOSU are promising avenues. It is in Japan’s interests to play an active role in those mega free trade agreements as well as trying to save the WTO from dysfunction together with the European Union and others. Lastly, for security issues, I believe the Trump administration understands the importance of Japan for keeping the US influence in the region. Japan will have to bear a higher defense cost, but I don’t think that is necessarily bad as it will also mean greater autonomy for Japan’s policy even in the security sphere. It will not change the fact that the US will continue to be the most important ally. But Japan will seek more multilateral cooperation as exemplified by the cooperation among Japan, the UK, and Italy to build a next generation fighter jet. To conclude, I see Trump’s policy as a symptom of the relative decline of the US power and influence in the world and not as a cause. We all must prepare for the changing world order. For those of us in East Asia, this trend is particularly alarming as many countries in the region have an export oriented strategy and rely on US dollar. We should not act unilaterally, but we should find a multilateral solution to avoid falling into an equilibrium with less trade and lower welfare. These are my thoughts on tonight’s topic. Um, thank you for listening and I look forward to the following discussions. Thank you. I think lot of wisdom in your words. So because you are saying that I use the word tariff war. So you are saying it’s not really a war unless you decide to make it a war. So very very very wisely articulated. Thank you. And as you rightly summarized, uh the world has to sort of reinvent uh itself to deal with both the declining aspect of US power as well as the declining influence that it it will carry on the other economies. So we will have to reinvent. So in that context I have uh some questions um which will uh because I gave the example of Japan’s uh dependence on u for example the auto uh industry or auto machinery electronics. Um so you you as a nation have been focusing on um US market because it’s a one of the biggest markets. Um will this uh type of protectionism uh create a vulnerability [Music] uh I mean in the short term uh and can uh Japan uh afford to continue its uh current export cons uh concentration uh given the r rising uh trade tensions not just uh Japan, not just US but maybe other countries may also do that uh later. So should I comment please? Yeah. Yes. Um I um so okay um it is not the first time that Japan is under pressure. I see the automo industry is under US pressures. uh we have experienced uh multiple rounds of uh trade negotiations with the United States. Um even starting in the 80s um the automo industry uh got uh or suffered a blow after the plaza accord in 1985 when uh the Japanese yen was sharply appreciated uh by the uh interventions in the foreign exchange market by back then the G5 countries. But uh you know in the following years what uh Japanese automo industry did was basically uh shifting its production base more and more in the United States and other parts of the world. Um I mean that doesn’t mean that uh the tariff or even appreciation of Japanese yen uh uh does not matter for the automo industry. As you correctly pointed out, it is still the most important industry in Japan and Japan uh Japanese automakers sell more cars outside Japan than inside Japan. But uh increasingly more these cars are not directly exported from Japan but actually produced um for example in North America. Right. And uh so in in a sense Japan is no longer this very exportdriven economy. As a matter of fact, in the past decade, uh, Japan has been running more often trade deficits than surplus. Um still Japan’s current account uh remains positive every year but that is because the returns from Japan’s investment overseas compensates the trade deficit Japan has with uh with the rest of the world. In fact, uh, US service export to Japan is very big. Um, so that includes like you know all the platform services and data centers and intellectual property rights and and so on. uh but the return from Japan’s investment kind of exceeds the trade deficits and that’s why Japan still runs current account surplus but Japan is no longer the trade surplus nations that I think still many people think of Japan. Uh so that means basically Japan has as a country has been accumulate accumulated uh overseas assets and uh it is often the forgotten fact that still today uh in net terms Japan is has the largest overseas assets in the world. Right? So um even though so in in short even though these tariffs uh of course uh disturbances and it creates uncertainty Japan is still in the negotiation with the United States and we we don’t know whether this 25% will remain at the end or these two countries will reach any other agreements but um whatever happens I do believe that these Japanese multinational car makers will find a way whether it’s directly investing more in United States or as how they have done not just in United States but in Canada and Mexico and other countries. um as well as finding new markets right um US is still a very big market but uh the growth is slowing down um on the other hand in Southeast Asia in South Asia in India the markets are growing so you know as you again pointed out uh the world is changing and we also have to think of the long-term trend uh which is we also have to consider the relative decline of the United States and it’s also weakening influences in the region. Yeah. Oh, wonderful. Wonderful. Um just uh a a question related with what you just now said. Um I understand your point that at the beginning you said that we are Japan is not at retaliation mode but on a negotiation mode. Um I think Indian government has similarly taken a approach of negotiation. Um but the negotiation is going towards a bilateralism rather than a unilateral approach uh or globalized approach. So in terms of uh these tariff wars which are even okay tariffs I won’t say war in in terms of the tariffs uh creating uh acceleration of a decline of multilateral trade systems uh as you said WTO how to prevent a total collapse of uh that um because if that WTO concept or multilateral concept uh fails, it will lead to again uh maybe push us back to the concepts maybe many years ago where we used to have fragmented politically driven trade blocks and uh will all this uh mean um what does it mean for global uh economic uh stability in in the say short term or medium term or even in the long term and so the second question linked with that is um I understand that you are no longer a trade uh I mean pushing products but but you have done wise investments in various assets across the globe which is reaping you benefit and leading uh to net positive in terms of your account. But uh have our people um not just Japanese but other miscalculated the geopolitical risks uh embedded in this global supply chain strategy or is it something that that risk was always there but it has only sort of become brought more into focus. focus. So I have two parts to this question. The first part was uh more to do with a global aspect about the death of multi-aterateralism and second is the focus on the global supply chain whether it is a good thing or this realignment is coming was long overdue. What do you think? Um yeah, first of all, I think I share your concerns on uh you know, possible dysfunction of the DTO that that that’s going to be a huge problem. But I think fortunately I think among the uh leaders of big economies in the world uh Mr. Trump is quite unique. I think no no other leaders think of the world economy and international trade like him. So what that means is at least meanwhile as we face a lot of uncertainties with uh how the Trump administration’s policy are going to be. We have to defend the system. We have to defend the liberal order even without United States because I think there will be no way that any leaders in the world can convince Mr. Trump otherwise. I think he really lives in his own world. Uh and he will not let himself you know influenced by by anyone else. Um yeah but but I remain optimistic that uh in that respect the rest of the world is actually quite united. Um I see a stronger also interests uh for example in European Union to work closer with Japan. I think even countries like China will take this chance to fill in the gap and the void that United States left or is going to leave in many parts of the world. Uh because it is only in China’s interest. I think China knows very well that it has grown rapidly benefiting from the liberal order and it is not in China’s interest uh to go back to the world as you said where countries are more protectionists and uh you know less liberal in terms of international trade. uh on your second point on I think global supply chains. I think we have seen again multiple disruptions of global supply chains even in the recent past. you know, we had uh COVID 19 and then of course we had also the first Trump administration and now the second and uh uh I wouldn’t say that we predicted uh that Trump will impose such extreme tariffs. not just on selected countries but across the board including its closest trading partners like Canada and Mexico and also its closest ally like Japan and many countries in Southeast Asia where the production chain shifted from China they are now uh facing even higher tariffs uh than uh US trading partners. Um so that that’s a huge disruptions. Um but again I think multinational companies even though the exposure to United States is big again US is not the only big economy in the world. So I do think that they’re able to adjust uh in the long run at least or in the medium to long run even though in the short run of course there are a lot of confusions and uncertainty right is the biggest e biggest enemy for for global business or investing in anywhere. So, so for sure we will see short-term uh you know drop uh in in consumption or investment in various parts of the world probably uh things like ma M&A margin acquisitions will go down simply because I think the mood currently uh is not very good but I think in the long run uh the multinational corporations will come to terms with these changes and will readjust their global supply chain. Yeah, I might be over optimistic. That’s my view. So uh do you think I mean just as a followup to that do you think this realignment of the supply chain you are saying was anyway uh you had already predicted that and uh it was to happen but it may only re accelerate as uh because of this type of uh um protection that is happening. I think you’re right. I think you’re right. Um you know the industry know that the growing markets uh elsewhere might be in Southeast Asia, it might be in India in the future it might be in Africa. Uh but of course again uh as he also said in in the short term there will be a lot of disturbances but uh these changes are to be expected. Of course we don’t know exactly when and how fast and as you said I think Trump accelerated some of these trends uh in a way that we could not not have predicted before. uh but yeah I think uh for for any companies you know diversification today is a norm and uh yeah even though there are short-term disturbances I think uh especially if the US policy becomes a constant if Trump’s policy becomes a constant they will find new markets right Right. Right. In a um a lighter vein Dr. Kikuchi um there is a very quotable quote which says uh only idiots refuse to change their minds. So whether that applies to our friend uh President Trump that is a debatable point I guess but um having said that within India uh which is also following a non-confrontational approach to uh the US there is a lot of flack uh internally within in India as well as I think about both Japan and India’s diplomatic postures are they have they limited its ability or their ability to push back against the targeted US tariffs. So this is slightly economic but also political question. What do you think is is this type of non-confrontational uh approach as against China’s very confrontational uh response do you think it is limiting us or is it a a positive in in the longer run? Yeah, I I think um it’s a very interesting question and I think but I think Japan today is not the same as Japan uh let’s say in the 80s uh when Japan also faced a severe you might call it trade war with United States uh back then I think Japan really compromised and basically accepted a lot of requests uh that United States imposed on Japan. I think today Japan is in a very different position. First of all, Japan’s export surplus with United States is not that big. In the 80s was absolutely the largest in the world, but today probably it’s still in the top 10, but you know, not in the top five. Um also uh the world outside Japan and United States has changed a lot right for most of us our biggest trading partner is no longer United States but China and uh uh yeah and and and I think that also affects how the Japanese administration negotiates with United States. I think they said it clearly. Of course, it is not in I think Japan’s national interest to really detaliate and confront United States. That’s not how Japan is made up after the Second World War. But still I think uh Japan there are some uh areas where Japan will not just easily give in and I think that it’s going to be a quite tough negotiations. You know it’s not that the Japanese side will accept whatever United States is saying. uh because Japan also knows uh as we have been discussing the declining US power and interest and and so on. So I think Japan has even though it is not uh the Japanese way of doing things. I think u the administration has uh more cards to play with than in the past. uh I don’t know about India so I think that’s I would like to hear from you but uh let me just give you also another quote which I like actually from Charles Darin okay who said it is not the strongest who survive but those who adapt I think that’s what is now uh de required from all of us. Yeah. Fantastic. Very good. Thank you. Yeah. Uh actually uh one of the triggers for this uh question was that internally in India there’s a lot of debate whether uh our um uh debate and also or I would say disagreement that the government is too soft. Uh so do you find is Japan speaking in one uh tongue or internally are there any um opposition to the officials stand that the government has been taking? Uh there might be some uh oppositions uh in the parliament. I think some wants a stronger stance against United States. But really again I I do think that it is in a way opportunity for Japan to um think broader. Okay. And uh not just think that forever we can rely on United States and I think it is really now a moment where Japan has to think about how to survive in the region in the world even when it’s closest I are not so kind to us. Right. Right. So I think there might be a different degree in the stances how to negotiate with United States but I think uh almost everyone is on the so same boat in uh pressing us to think harder and to think you beyond just relying on United States which which personally I think is a pos positive trend because it simply also means probably the international trade and uh you know even the international financial and monetary system that really centers around United States and which also resulted in the huge accumulation of US government debts and so on that’s not sustainable forever and uh we have to I think uh yeah de demagine how we can survive uh yeah in the world yeah thank you thank you um slightly away from economics uh if I may uh also take you through the geopolitics of uh the region. Um all the the government I mean Japan as a nation has had economically I would say stagnation at least that’s how it looks to the outside world for almost a decade and a half. Uh so to what extent has that uh put pressure has it creating or undermining uh its regional influence and strategic uh ind inter uh independence or um that this type of less dependence on on US is going to in increase Japan’s regional influence. So that is one question I had. Um, of course linked with that was a second question about the security uh ties with us. Even India is involved in um in that is that also going to compromise Japan’s freedom just like India’s freedom to define its own economic strategy or is this a good oper good way as you are saying earlier is a good trigger for us to both our nations to go away from the US umbrella. um on the lost decades in Japan. Uh it is interesting. Um but I think I mean you you’re absolutely right that Japanese economic power has waned over the last decade. Um, you know, if you think about this, uh, even in the mid 90s, Japan’s GDP was bigger than Southeast Asia, China, and India combined. Right now, China’s GDP alone is, I don’t know, almost three times of Japan. So the the world has completely changed and Japan’s position in the world has completely changed. But interestingly I’ve I think Japan’s soft power has actually increased. I see. uh that’s not a hard power but thinks things like uh CPTP I think it was unthinkable 30 years ago that Japan after even though the United States withdrew from the neg negotiation continued its own path and then you know negotiated with rest of the members to rescue uh the TPP which then became CPTP. And I think that also shows that unlike uh the 80s or the late 80s which was the peak of Japanese economy when Japan had a lot of economic power and financial power. In the past three decades, Japan has become more open. Uh Japan has invested a lot overseas also. uh within Japan there are changes obviously now the Japanese corporations probably 30 to 40% of their sales or profits or production uh overseas uh in the 80s it was just 5% and now it’s 30 to 40% and you can see that Japan’s interest has also changed along with these developments uh so I I think it is really today in Japan’s interest to uh defend uh the liberal economic order uh unlike in the past where Japan’s power came more from growing and expanding domestic economy. I I think that’s a major shift that has occurred in the last 30 years. uh what that implies for security. Um again I think the trend is similar. Uh in the past, Japan would have just said uh the US Japan alliance is the cornerstone. Uh as long as we keep that alive and strong, we are safe. We are under the US nuclear umbila and nobody can touch Japan. Obviously, that’s changing too. uh Japan also faces I would not like to say military threats but of course they are security risks in the regions um we don’t know what kind of contingencies can occur miscalculations uh I I don’t think it is actually in any country’s interest now to you know uh in in East Asia to uh launch a war or missiles. Uh uh so uh but uh yeah yeah you you’re right and I think as I also uh said in my comments uh Japan will have to increase its uh defense budgets and it will have to cooperate more with uh partners. as uh other than United States and I think that would include India as well uh yeah the the so-called likeminded countries uh I think are coming closer together uh to if not maintain the status quo uh to uh uh yeah to make the security environment and uh not that unstable. Yeah, as you rightly said, uncertainty is the root cause of all uh you know unhappiness in this world. So, so on all these fronts we need to secure ourself reduce uncertainty as much as possible. But visavi this I have the final question because a lot of questions are there from the audience. So we will address that uh immediately after this final uh exploration that I have with you. um this uh the way we are now going towards the global uh trade negotiations etc whether it is bilateral or multilateral um are they addressing as per you are they addressing the root causes or they are just focusing on managing the symptoms of deeper political fractures that are visible so That was one major doubt or questions that comes up. And second element there was how credible are the prospects for the new trade deals in a environment? Trade deals means multilateral trade deals um in a very productionist climate that we are seeing now. Okay. I I like to first know what the root cause is. Do you have any do you have any uh suggestions? Uh what the really root cause are? No. No. What I meant by root cause is whether they are addressing the deeper one. Of course, root cause is you know like Trump type of person coming in and causing or Putin type of guy coming and causing. So these are hopefully aberrations. U but uh as you rightly said um fortunately it is not a all all global leaders are not like Trump or all global leaders are not like Putin. So if you remove these two big outliers, uh there is a general agreement that people are wanting stability, wanting uh a global order uh etc. But that is one aspect. But um the ideal state of trade is that going back whoever is strongest in whatever will make it and supply to the others etc. But those the root cause there would have been that people do not appreciate it and want to grow everything locally things like this. So that is what I meant whether we are going back to the economic or economic principles that whoever can do it cheapest and the best should make it and supply or um we are shortcutting it due to other pressures. Okay. Yeah. I I think I I got more ideas from you. Um I do I would say the root causes of what we see today in many countries in United States or even in Europe are I think the consequences of globalization and how each country has dealt with globalization. Um, for example, President Trump, I think, laments that the manufacturing industry in the United States has disappeared and United States have to buy all the manufacturing goods from China and other countries. And uh without the manufacturing industries, you could argue they do not have enough employment opportunities for uh the middle class and therefore it also leads to inequality and so on and so forth. But I think for all these problems a country like United States, this is my view cannot blame China. I think at the end it is a political choice they made in the past. You cannot just look at the trade deficit the United States runs with China and the rest of the world. But you also have this thriving tech companies United States the magnificent seven that just the market capitalization of these seven companies account for I don’t know what 40% of the US market capitalizations you know and these corporations for sure have been lobbying the government changing the regulations in favor of them so that they can monopolize the market and that’s a huge problem. It is not just a problem in the United States but for the rest of the world too. Uh and we know that these companies even don’t or they pay little taxes. Okay. So, so that’s a big problem. These I think are the root cause. Um but you cannot blame the globalization for these things. uh because it is essentially a public policy questions in each country. Um we know it is not just um international trade that can cause uh disturbances and realignment of industries and so on. But it could be also technological advances like AI or it could be also climate change. A lot of things are happening in the world. I think it is each country’s uh and each government’s responsibility how to deal with these shocks and you know to create uh let’s say a fairer uh societies in many respects and I think that also goes for uh you know the the rise in the rightwing politics in Europe. Um it could be that many governments or countries have miscalculated the consequences of mass immigration in those countries. They have failed to implement policies that better integrate these immigrants in those societies and you know create also a a feeling among the stakeholders in each society that they are actually benefiting you know from immigration or international trade or globalization. Yeah. But we have we should not forget uh that uh beside the problems that we see there are also beneficiaries and often in this case the beneficiaries are multinational organizations that operate globally and do not necessarily benefit uh the locals but reap great benefits out of uh this globalized world, right? And who can control them, who can regulate them, it has to be Yeah. the the responsibility of governments in in every country in the world. Yeah. Wonderful. Wonderful. Thank you. And okay, for trade deals, I think that’s that’s uh more more simple. Yeah. I would uh invite uh India to start uh the negotiation again to join ARP, right? And I think you you know that UK even though they left European Union u UK remains to be an internationally very open economy. uh so they have already joined the CPTP and there are other applicants uh for CPP CPTP too. Um it remains to be seen how the CPTPPP countries will you know uh negotiate uh with China for example that that’s going to be a uh a big challenge but uh I think in Japanese government minds having again a closer trade relationship with European Union for example it’s not unthinkable that EU as a all will have some kind of uh relationship with CPTP. I think that that’s the way forward. Yeah. Thank you. Right. Right. Thank you. I think uh if there are as I said lot of questions from the audience we will take a few. I was wondering uh before we continue uh Kikuchi uh Dr. Um, is it okay to share your u email ID for any questions that the audience may have? Uh, will you be able to uh uh take those type of questions as a trigger after this session? You mean by email? Yes. I mean yeah of course you can share your email address with the audience and if anyone is interested in getting in touch with me yeah they’re welcome to do so yeah very happy to hear that but of course if I’m swept with 100 questions I’m not sure if I can answer all of them but yeah we we will see you you you can select and reply um just uh there’s a lot I mean at the initial stage you this is from the audience questions um about the predominance of US dollar and how maybe the Chinese yuan or even the gold standards people are looking at as a exchange going backwards again. So how likely do you think as a macroeconomist uh do you think that this is possible in the emerging uh world economic order? um China, yuan currency or any other maybe EU or going back to the gold. Yeah, I think gold standard for me uh is not very realistic even though I know that even among the economists you know they are big fans of global global standard because that means basically uh yeah low level of inflations and more stable economy and I mean in the past periods I think the gold standard periods were also periods where international trade expanded uh because of the certainty you know that that the fixed exchange rates have provided. But going back to that it would mean that all the countries will be restrained in their conduct of monetary policies and there are so much now you know uh liquidity and money creation uh everywhere in the world. So that I I don’t think it is very realistic to go back to the gold standard period. Now uh if US dollar the the things about world reserves currency is that uh there is a huge uh network externality right so I think uh it is uh actually in everybody’s interests if there is a one strong currency and stable currency that everybody uses uh because that lowers the transaction costs and exchange rate risk and so on and etc. uh but if the issuer of that country and in this case United States would no longer see it beneficial to uh keep the US dollar as a reserve currency that they there got to be alternative but I think the reality of the world today is that there is no really alternative except the euro which is already you know a a global currency and within European Union most of the trades are settled in Euro and so forth. But again for countries in Asia in particular uh we depend on US dollar too much. So that I think the for example switch to US do from US dollar to Chinese R&B is is also unrealistic. uh especially given the fact that China uh capital account still remains uh relatively closed and I don’t think anytime soon the Chinese government has an interest to have a fully open capital account and free flow of capital in and out of the country. So it I think China’s approach would be more gradual. uh but then you know whether we can really have the infrastructure of uh multicurrency trading system um that you know I don’t have the uh yeah I don’t have the foresight in into that that possibility but uh that that’s an interesting uh thought and I think we should definitely uh think about uh probably promoting more regional currencies uh diversifying the risks and and make the best use of uh technology that we today have whether it’s blockchain technologies or central bank digital currencies you know I think they are uh promising opportunities is and uh yeah I I I think uh okay I I don’t have a clear answer what the alternative to US dollar is uh but that’s let us keep thinking hard right thank you I think that was a very but one question which keeps coming up um because uh in a democracy uh hopefully unlike Putin’s Russia, Trump will not continue beyond his second term. So will will all these things that he’s disrupting will it revert itself do you think in the once Trump departs? [Music] uh hopefully at least some of the erratic behaviors but again we as we have discussed many of these things are long-term US trends right and uh after the first you know Trump administration uh Biden for example had a chance to dejoin CPTPPP but it didn’t right and I I think the frustration of let’s say middle class or lack of manufacturing capacity and growing inequality. I think all these problems uh well will remain even after hopefully Trump stepping down after his second term. We we don’t know. There are speculations that he’s going to change the constitution whatever. I I don’t know. But I mean he’s also getting older. He’s also a human being, right? So yeah. Yeah. But um I think most of the general trends will remain but hopefully these erratic behaviors and you know his art of deals with creating uncertainty and letting the opponents confused. I think that we we hope that that that will no longer be true after his administration. Yeah, but the uh thank you. This uh Japan has been looking at US uh as a major partner in the initial days and now as you rightly said it has become China but are you looking at considering the geopolitical risks that China is with all its aggressive behavior. Do you have a China plus policy which includes other countries or what exactly is Japan looking at in the broadest economic sphere? So China plus in terms of economy. Yeah. Yeah. Sure. Sure. I think uh you know uh it is also getting harder to compete in China. As you know there is uh excess supply and over capacity in many sectors in China. many Japanese um uh companies in including automo companies like Nissan have decided to withdraw from the market. Um and that’s one because there is really I think uh over production and excess capacity in China but also uh uh Chinese workforce have become increasingly more expensive. So I think the trend that many of these manufacturing firms started shifting their production bases away from China into Southeast Asia and now India is one of the promising destination right uh not just Japanese companies but also Apple has announced that they’re going to produce iPhones in India and and so on. Uh that that’s also again a long-term trend. uh you know it didn’t really start with Trump administration Trump administration might have accelerated the trend but uh yeah not just China plus one but you know as you as you know uh Thailand for example has been the major manufacturing base for Japan in Southeast Asia especially for all the mobile industry but also there’s a concept of Thailand plus one right so I think diversification in general has been going on now for decades and I think the trend will only continue. Wonderful. Wonderful. Thank you. I think you have been a great inspiration and a very positive outlook in in this very disruptive and confusing environment. you have given us a uh very honest and uh you know 360 perspective because you started by saying that you can understand Trump uh Trump’s initial motivations. I think that itself put us all in a different frame of mind as we said okay we are going to hear a very balanced perspective rather than just blaming Trump or Trumpism as uh some people call it. So truly appreciate uh your um patient answering and also uh filling in for the void of uh do professor Urata’s absence by your incisive thought and thoughtprovoking discussions and uh and we are also grateful that you were able to you have accepted to answer some of the questions because there are Many more questions uh due to lack of time we will not be able to address in this forum but they will uh uh the participants of this webinar would uh be in touch with you to take this forward. Uh I would like to uh end this uh by warmly uh inviting you to uh come to uh I am Bangalore and um speak to our fraternity and that will be a great opportunity for us to learn more from you. Thank you very much Dr. Thank you Mr. Ratnam for being a wonderful host and uh of course I look forward to any opportunity that I might have in the future to visit Bangalore. Thank you very much. Thank you. Namaste. Thank you.
In an era marked by rising protectionism and economic fragmentation, the once-stable architecture of globalization is undergoing a profound transformation. This webinar brings together two of Japan’s foremost economists to explore how new tariff regimes, shifting trade alliances, and strategic decoupling are reshaping the global economic order.
Speakers: Prof. Shujiro Urata (Professor Emeritus, Waseda University; Chairman Emeritus, RIETI) and Dr. Tomoo Kikuchi (Professor, Graduate School of Asia-Pacific Studies; Director, Institute of Japan in the Global Economy) will examine the impact of recent tariff wars—particularly between major powers—on global supply chains, international institutions, and regional economic strategies.
Join us for an insightful discussion on the future of globalization, Japan’s strategic trade recalibration, and the broader implications for economic cooperation in a world marked by uncertainty and realignment.