Trump may have to ‘start from scratch’ if Japanese PM Ishiba leaves office after elections: Expert

Trump may have to ‘start from scratch’ if Japanese PM Ishiba leaves office after elections: Expert

in India. Joining us now for more is William Pessek. He’s a columnist and author of Japaneseization. Um William uh let’s uh start with the latest developments out of Tokyo where you are. Prime Minister Ishiba drawing a firm line saying that we will not easily compromise given the looming tariff deadline and also the political pressure at home. Just how much leverage does Tokyo have left and who’s more likely to blink first? I think the bigger question is how much leverage does Trump have left? I mean, one of the things that Donald Trump probably doesn’t know is that there’s an election happening in Sunday and Prime Minister Sheiba could be gone by Monday. His approval ratings are in the high 20s, the low30s. His party is expected to eek out uh something of a of a victory on Sunday, uh but basically not winning a full majority. And so, Prime Minister Ishiba could be shown the door within a few days and then President Trump has to learn the name of a new Mr. Japan and needs to sit down with a brand new trade deal and really start from scratch because the next government might have very different ideas than the current government. And I see a lot of what’s happening as Trump thinking that the global economy is a big reality TV show and the next episode is tariffs, the cliffhanger, tariffs. And I think, you know, we’re looking at August 1st and we’re thinking about the extent to which countries can basically race some kind of deal into existence to avoid bigger tariffs from the from the US. But the bigger question for me is what’s the point of all this? I mean, Trump will get some victories. Maybe he’ll be able to do some ribbon cutting. He’ll do some press conferences. He’ll sign some documents. But will this rearrange the global trading system? Will this change the relationship? in any way between the US and Asia. I’m skeptical of that. And really again, the big question is China, right? Japan, India, uh, Indonesia, these are important economies, but it’s all about China and it’s all about Trump getting China to the altar. And the question is how is he doing on that? And the answer is not very well. Okay, we’ll get to China in a bit, but you know, I want to ask you about Japan. I was going to ask you what’s making it especially difficult for Japan, but I realized that I should reframe that, you know, given what you’ve said about the art of the deal and how it’s not working uh in Asia at this particular time on tariffs. Can you get us give us a sense of what’s the thinking that the Japanese and also the South Koreans have as they engage in negotiations and you know try to basically do away with any tariffs on their key exports uh particularly I guess autos right well I think the Japanese are just frustrated six years ago the Japanese went through this process earlier right six years ago Japan signed a free trade agreement with the US now we are here we are six years Trump wants another another free trade agreement with Japan and Japan is rolling his eyes saying what are we doing here? Um I think one of the concerns that Japan has certainly also is that Trump misunderstands the relationship between Japan and the US. I’ve lived here more than 20 years and I can tell you the reason why Japanese don’t buy US cars is because Japanese roads are tiny. US cars are hu US cars are huge. That is the problem. That is why Japanese don’t buy Fords and GMs. has nothing to do with tariff rates, has nothing to do with non-tariff barriers. Also, Japanese believe that their cars have better quality than US cars. And so, Trump is acting as if he’s going to change this relationship. He’s going to force Japan to import millions of US cars when no one’s going to buy them. And that’s why you see Trump focusing and his team wisely, I think, focusing on certain areas where there could be agreement, like rice, for example. Japan’s having a rice price um crisis at the moment. Um, the US could certainly import more rice to Japan to help US producers, but also to allay or alleviate China’s pricing crisis for rice. That’s an area of agreement. But I think in many ways, Japan is like, look, we did this six years ago. Why are we doing this again? And we might have a new prime minister in a couple of weeks. So why don’t we do this in 2026? Why are we rushing to do this right now? So I think Japan is a bit frustrated. And I think the US is surprised that Japan has not been more compliant. Right. I think Japan thought the US would be so easy while Japan will be so desperate for a deal. We’ll have that big win in the you know in basically in the victory column early. Japan’s been a lot more difficult than the US expected and I think Trump is frustrated as well. William to your point about China. I mean how heavily this is a broader question for for Asian countries who don’t yet have a deal that China transipment component I mean is this something that we are going to see is it what Trump is expecting from countries in particular which have that China plus one component as part of their economies and local manufacturing. Well, I mean that that is really the question because a lot of these trade deals are being signed with China in mind. Like when the US signed a trade deal with Vietnam, we’re still not really sure what that trade deal is. But when the US signed that deal, it wasn’t about Vietnam. It was about China. And the whole, you know, issue was about trans shipments. And I think Vietnam signed the deal knowing full well that in Asia given supply chains, it’s very, very difficult to figure out which is a trans shipment and which is not. And you know, basically exporters can get very creative about labeling boxes differently and essentially evading these latest US tariffs. And I think that’s why Vietnam was very happy to sign a document because they know it’s really not enforceable. But you’re right, this is all about China. It’s all about trans shipments. And I think Trump also is very frustrated by the fact that Xiinping has been a much more uh you know sort of equal adversary than he ever expected on this issue. And I think that the best case scenario for Trump is that he signs some kind of trade deal with China to get the victory and say, “Look, I signed a trade deal with China.” But it won’t change the relationship significantly between the US and the Chinese. And one of the reasons is because the Chinese are ready for him, right? The Chinese live through Trump 1.0. They saw his tactics then. They know exactly how to play this guy. And in many ways, China is ready to sign some kind of non-deal deal that doesn’t change the trading relationship very much, but gets Trump to move on to other other pet issues. Uh he’ll he’ll move on to India. He’ll move on to Latin America. He’ll move on to Africa because he’ll have a China deal in his pocket. One that doesn’t change very much, but one that will get him him off China’s back. Okay, William. Uh speaking of tactics, um some analysts point to a pattern uh where Mr. Trump backs down when confronted with economic strength strength as in the case of China but escalates when countries hesitate or rely on diplomacy is strength or countermeasures or threats the strategy that works with this administration well it’s the strategy I’m not sure it works I mean you’re referring to taco right the idea that Trump always always chickens out that’s that’s why Wall Street is not plunging every time Trump now talks about tariffs when Trump recently talked about taxing Brazil, the stock market didn’t collapse. When Trump talks about taxing the EU now, the stock market doesn’t collapse. When Trump talks about anything to do with OPEC, the stock market doesn’t collapse because I think traders have realized that again, Trump will always chickenen out at the end of the day. And that’s the bet they’re making. And Trump really is afraid of the bond market. So, anything that the bond market does to push back against his policies is going to work. Anytime US Treasury yields rise, anytime that feeds back into the stock market, the S&P 500 has a rough day, Trump backs off. And I think, you know, investors know that. I think countries are beginning to know that more and more. And I think for a lot of national leaders when they sign a, you know, what, you know, a free trade deal with Trump, a lot of it is performative. It’s just basically getting him off their back um to let him move on to other issues and other victims, if you will. These are not negotiations. These are shakedowns. And you know, I say this painfully because I’m I’m an American. I’m from Queens, New York, where Trump is from. So, you would think I’d be more supportive of his policies. But I’m horrified of the extent to which I’ve been writing about Asia for 20 years. And I’m just horri by horrified by the extent to which Trump has come here to this region with complete ignorance and acted as if it’s 1985 all over again. And it’s 2025. Somebody should tell him. All right, William. looking into 2026 and beyond. I mean the factors that you mentioned what’s being factored in are world leaders particularly the smaller nations I guess factoring in or you know I guess maybe resigned to the fact that we are facing a world where US terrorists are going to be there. I mean Trump has talked about a baseline of 10 to 20% and I’ve come across many reports you know that say that’s the reality that’s the that’s that’s what it’s going to be going forward. You know, the tariffs are one thing. The uncertainty is something else. If the world knew that the US was going to set a 25% unilateral tax for all goods, that will be a problem. But it’d be better than not knowing what tariff rates will be a year from now. So, if you’re a business, if you’re an exporter, if you’re a a small mom and pop shop in Jakarta and you’re trying to figure out if you can hire a couple of people in the next 6 months or fire a couple of people in the next 6 months, extrapolate this out through the region. You know, we have billions of people in Asia sitting around wondering what gives. And I think the uncertainty is almost worse than the tariffs. I think, you know, for Asia, this is a lost period with the US. I really see no uh avenue for Asia to work with the US productively when you know as I wrote in a column recently Donald Trump to me is like the the Joker in the Dark Knight the Heath Ledger character he’s just somebody who wants to watch the world burn and how do you do business with that guy and I think for Asia the uncertainty is almost worse than than the terrorists themselves unfortunately we have these two problems being layered on top of one another and you know I just think that for anyone in the financial industry or business industry who’d hope to take a vacation in August. Good luck with that. All right, William, we are going to have to leave it there. You and with that image as well from Batman, William Pesk is columnist and author of Japanization. Thank you so much. Thank you.

Japan is holding tariff talks with the United States as it races to avert a 25 per cent levy that will be imposed unless a deal is clinched by an Aug 1 deadline. Japanese Prime Minister Shigeru Ishiba is also scheduled to meet US Treasury Secretary Scott Bessent in Tokyo on Friday (Jul 18), according to the Japanese government. Tokyo-based columnist and author William Pesek tells CNA’s Asia First that US President Trump may have to “start from scratch” regarding a trade deal if Ishiba leaves office following Sunday’s elections. He also discusses how the ongoing uncertainty over tariffs across Asia is “almost worse” than the tariffs themselves.

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