Recommendation: "Korea Should Use Its Competitive Strengths as Negotiation Cards"
A national policy research institute has analyzed that Japan's economic growth rate could decline by up to 1 percentage point due to export reductions caused by automobile tariffs and reciprocal tariffs imposed by the Donald Trump administration, as well as the global economic slowdown.
On April 24, the Korea Institute for International Economic Policy (KIEP) projected that Japan's gross domestic product (GDP) growth rate for this year would decrease by 0.7 to 1 percentage point due to reduced exports to the United States, a decline in capital investment, and a decrease in private consumption. This projected decline is greater than the 0.5 percentage point drop previously forecast by the International Monetary Fund (IMF), and is based on a comprehensive evaluation of simulation analyses conducted by three Japanese private research institutes: Nomura Research Institute, Daiwa Institute of Research, and Mizuho Research & Technologies.
KIEP stated, "The U.S. tariff policy will have wide-ranging economic ripple effects not only on Japanese exports, but also on corporate production and investment, private consumption, and financial markets," adding, "In particular, additional tariffs on automobiles will place a significant burden on Japan's automobile industry, which is highly dependent on the U.S. market."
It is expected that a decrease in automobile export demand and an increase in local production in the United States, resulting from U.S. tariff policy, will have negative effects on production and employment across the Japanese manufacturing sector. The automobile industry in Japan has a large production-inducing effect and is linked to a variety of industries, including steel, electrical machinery, nonferrous metals, and information and communication machinery. As of the end of 2023, employment in automobile-related industries accounted for 8.3% of Japan's total workforce.
KIEP noted, "The Japanese government is likely to engage in all-out negotiations to eliminate automobile tariffs," and added, "It is also expected to pursue measures to ease non-tariff barriers, such as relaxing Japanese automobile safety standards to increase imports of U.S. vehicles, as well as to participate in currency negotiations to address the excessive weakness of the yen."
The Trump administration, despite a U.S.-Japan summit held in February, imposed a 25% item-specific tariff on automobiles, steel, and aluminum, and a 24% reciprocal tariff on all other items imported from Japan.
Japan was the first to sit at the negotiating table with the United States after President Trump imposed tariff hikes on major trading partners around the world. During the first round of negotiations held in the United States on April 16, led by Economic Revitalization Minister Ryosei Akazawa, key agenda items included the elimination of non-tariff barriers on products such as rice and automobiles, and restructuring the structure of the U.S. trade deficit with Japan.
KIEP recommended that, taking Japan's earlier negotiations as a reference, Korea should organize potential areas of cooperation with the United States and prepare a variety of negotiation strategies in advance to strengthen its bargaining power in negotiations with the U.S.
KIEP also advised, "Given that the primary objective of the U.S. tariff policy is still unclear, Korea needs to examine potential areas for multifaceted cooperation with the United States," and added, "Korea should utilize its competitive strengths to identify ways to contribute to U.S. manufacturing reinforcement and national security, and use these as negotiation cards."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
