Japan, then China: Origins of a trade war
Plus, Omer Bartov on antisemitism real and imagined
The president stood sternly, waving his finger at the podium at the Pacific Rim Economic Conference in Oregon. While promising he was not interested in ushering in a new age of protectionism, the president chided one of America’s most important trading partners for unfairness. It kept its markets closed to U.S. exports even as its products freely poured into the United States.
Now out of patience with this two-year-long trade dispute, the president was ready to impose punitive tariffs as a means to break the impasse: $6 billion in tariffs on luxury automobiles.
“We still have a huge and persistent trade deficit with Japan,” said President Bill Clinton in June 1995. “More than half of it is in autos and auto parts. We have a trade surplus in auto parts with the rest of the world because we are the low-cost, high-quality producer of auto parts… but we still have a $12.5 billion trade deficit with Japan.”
“The bottom line is we want to open the markets for American products. And we will take action if necessary in the form of sanctions. We hope it will not be necessary. We hope it will not have an adverse effect in the short run on anyone, but over the long run, if we’re going to build the kind of global economic system we want, everyone must change… We have tried now for two or three decades to open this market,” Clinton fumed.
A day later, after marathon negotiations in Geneva, U.S. and Japanese trade officials reached a vaguely worded deal to avert the tariffs on Japanese luxury cars shipped to America. Tokyo agreed to adjust government regulations to “make it easier for American companies to sell replacement parts in Japanese repair shops, which until now have been strictly controlled by the car makers,” according to The New York Times.
While it is easy to say that President Donald Trump’s sweeping tariff plan is a terrible idea, this will not help us understand how we got here. Through the blunt force instrument of punitive import duties, the current president is trying to reverse global economic arrangements decades in the making. From the 1970s, deindustrialization in America meant industrialization in the developing world, now often referred to as the Global South. There were serious consequences for American workers who looked askance at the free trade dogmatism of the post-Cold War environment.
To better understand the origins of Trump’s trade war – whatever your opinion of tariffs – we must remember that for at least 40 years U.S. policymakers have been looking for solutions to the decline in manufacturing with its related drop in living standards and increase in income inequality, at least in many Rust Belt areas where the backlash to free trade is most keenly expressed. Moreover, Trump’s complaints about unfair trade echo past administrations, both Republican and Democratic.
In the 1980s, Ronald Reagan – correctly remembered as a free trader – ordered the Commerce Department to investigate whether Japan was dumping cheap semiconductors on the U.S. market. Reagan tried to pry open Japan’s notoriously strict domestic economy for American “communications equipment, electronics, forest products and pharmaceuticals,” as reported by the Los Angeles Times in 1985.
And Donald Trump, then half the age he is today, appeared on Larry King Live, The Oprah Winfrey Show, and other popular programs to muse about running for president. Trump repeated lines that are almost identical to what he says now about America being ripped off by its trading partners, although his main target then was Japan, not China. On September 2, 1987, the Manhattan real-estate developer bought full-page ads in major newspapers where he railed against foreign countries taking advantage of the United States.
The aforementioned Clinton, also remembered rightly as a free trader, ended his dispute with Japan only after threatening exorbitant tariffs on popular Japanese luxury cars. “This is the latest major block,” said Clinton in 1995, “to developing a sensible global economic policy.”
Capital mobility
In Friday’s episode of History As It Happens, historian Nelson Lichtenstein delves into this fascinating story. Lichtenstein directs the Center for the Study of Work, Labor, and Democracy at UC Santa Barbara. He is the author of the indispensable A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism, published in 2023.
Lichtenstein takes us back to the 1970s and ‘80s when policymakers, economists, and intellectuals filled books and magazines with arguments about the future of the American workforce. Was U.S. manufacturing in permanent decline? Does managed trade work? Do we need an industrial policy? What are Germany and Japan doing right? You may remember that in a 1992 Democratic primary debate, Paul Tsongas declared that the Cold War was indeed over, but Japan and Germany had won.
“Another definition [for deindustrialization] is capital mobility. If you have a factory in Toledo or Detroit that is closing down, it may be opening up in Mexico or Alabama or East Asia. Deindustrialization is how we may look at it here, but somewhere else is being industrialized. The question is, who is getting the benefits?” says Lichtenstein.
“My overall perspective,” Lichtenstein continues, “is tariffs alone are not enough. They have to be complemented by an industrial policy at home… One without the other is going to be much less effective,” if your goal is reshoring industries such as semiconductor manufacturing or apparel.
There is more to the historical equation than tariff rates and trade deals. The battle to curb inflation took a terrible toll on manufacturing from the late 1970s.
“The rural South and the Sun Belt boomed in the ‘60s and ‘70s with branch plants, the low-wage putting together of apparel and toys and parts,” says Lichtenstein. “But then to stop stagflation, to stop the very high rate of inflation in the late 70s, [Federal Reserve chairman Paul] Volcker under Carter and then under Reagan put interest rates through the roof. That did stop inflation for many decades, actually. But it also devastated industry and sent companies looking abroad even more for cheap places to slot into their supply chains.”
Thus, by the time Arkansas governor Bill Clinton sought the Democratic Party’s nomination in 1992, the air was thick with ideas for revitalizing manufacturing jobs.
Economic nationalism vs globalization
Can Trump “succeed” where other administrations met only limited success? It seems unlikely, not least because the president cannot stick to a coherent plan. Let’s revisit this superb essay by historian Adam Tooze in The London Review, published last November. Tooze assesses whether President Biden’s industrial policy can make more than a dent in Taiwan’s dominance in semiconductors or China’s manufacturing prowess.
The basic Biden narrative was of America’s fall from greatness, starting in the 1990s, when the industrial fabric of the nation began to fray and China’s manufacturing capacity surged. Now China and other competitors are rising fast. The home front is undermined by polarisation and social dysfunction. But, with measures such as the Inflation Reduction Act, the CHIPS Act (which increased spending on semiconductor research), the bipartisan infrastructure law and the NDIS, the Biden administration was attempting a national rebuilding centred on industrial production and a revalorisation of manual work…
It is unclear whether this campaign can succeed. Can America be made into something more than a mere auxiliary to the Taiwan-centred production network that currently dominates the microelectronics industry? Does the US have a credible competitor to TSMC (Taiwan Semiconductor Manufacturing Company) in the area of ultra high-end chip fabrication? Is Intel, America’s ailing champion, salvageable? And, finally, for all the ballyhoo around the CHIPS Act, $40 billion will probably not be sufficient to compete in the chip game. Even setting aside the huge funds that China is making available, private firms such as Samsung invest that kind of sum annually. As Biden’s term comes to an end, it is telling that officials including the commerce secretary, Gina Raimondo, are lobbying for a second effort from Congress. (Adam Tooze, Great Power Politics, The London Review of Books, Nov. 2024).
Back to Trump’s reshoring fantasies: One must consider the sheer enormity of the workforce companies such as Nike employ overseas. Nike has invested billions in Southeast Asia, especially in Vietnam, where it employs hundreds of thousands of workers. Is it realistic to expect these jobs will return to the U.S?
Another question: Do Americans aspire to sew t-shirts and put together sneakers? My late grandmother Mary Mancuso liked to sew. She was a seamstress in New York City — in the 1940s! Today, the prospect of working a low-wage, non-union job building plastic toys or sewing buttons may not seem very enticing.
A Cato Institute poll found that 80 percent of Americans agree the country would be better off with more people employed in manufacturing. But when individuals were asked if they would prefer to work in a factory, rather than nebulous others, only 25 percent responded yes. Immigrants would seem the most likely candidates to work in textiles or toys, but the Trump administration aims to deport them. A recipe for economic incoherence.
Omer Bartov on antisemitism
We received another reminder that antisemitism is a real and growing problem when a man set fire to Pennsylvania Governor Josh Shapiro’s official residence just hours after the governor celebrated Passover there.
The alleged arsonist, Cody Balmer, an unemployed welder with bipolar disorder, “admitted to harboring hatred towards Governor Shapiro” because of the deaths of Palestinians in Gaza, according to the police.
In January, the Program on Extremism at George Washington University reported that “antisemitism is experiencing a worldwide revival, with the events of October 7th, 2023, and the resulting Israel-Hamas war serving as an impetus to major spikes in hateful rhetoric and violent action. Antisemitic incidents were already at historic highs; they have increased further.”
In this dangerous climate, the Trump administration is, as expected, inciting more paranoia and division. The president and his minions claim to see antisemitism where none exists, and are using the federal government’s powerful law enforcement apparatus to disappear foreign-born students for the thought crime of criticizing Israel’s war on Gaza’s Palestinians. The administration is also attacking private institutions such as Harvard University for not doing enough to combat antisemitism, however defined.
In Tuesday’s episode of History As It Happens, a historian whose school is being targeted by the administration, Omer Bartov of Brown University, delved into the difference between genuine Jew-hatred and criticism of Israel’s current government – or even Zionism itself.
Some anti-Zionists are indeed antisemites; read Hamas’ or Hezbollah’s charter. Antisemitism is an ancient hatred whose outlandish conspiracy theories about all-powerful Jews have been embraced by people all over the globe. Before the Vatican II reforms, the Catholic Church for centuries collectively blamed all Jews for Christ’s death. The nineteenth century witnessed the rise of racial antisemitism, which paved the way to Auschwitz and Treblinka.
The campus protests and encampments that began in 2023 were routinely condemned as antisemitic by Israel’s supporters, even though thousands of Jewish students participated. Many idealistic young people are simply appalled at the images of Palestinian children’s mangled corpses. This does not mean they hate Jews.
“Arguments about antisemitism – which unfortunately did not begin with the Trump administration but were already being used, especially in the spring of 2024, under the Biden administration – were actually doing something else. They were trying to shut down speech under the cover that they were protecting Jews from antisemitism,” says Bartov, the Dean’s Professor of Holocaust and Genocide Studies at Brown.
“There are two issues involved here. One is what do you mean when you say antisemitism? That’s a complicated question. One person’s antisemitism may be another person’s political opinion. The second question is what is this term being used for? Is it being instrumentalized in a way that has totally different goals? I would say the way antisemitism has been used since October 7, increasingly in response to the protests by students, was a misuse of the term by arguing that opposition to Israeli policies, including anti-Zionism, was equivalent to antisemitism. That I think is false,” says Bartov.
Also discussed in the podcast is Bartov’s moving essay in The New York Review reflecting on Israeli society and the destruction of Gaza. In his view, the history and memory of the Holocaust are being used as a defense mechanism to deflect culpability for an ongoing genocide.
“The long-term consequence of this travesty may, however, be that the genocide in Gaza will finally liberate Israel of its status as a unique state rooted in a unique Holocaust. This will hardly help the tens of thousands of Palestinian victims or the victims of the Hamas massacre, the dead and dying hostages or their broken families. But the license that Israel, the land of the victims, has long enjoyed and abused may be expiring,” writes Bartov, who was born in Israel and once fought for the IDF.
What’s next?
April 30 will mark fifty years since the Fall of Saigon, the final nightmarish chapter in America’s failed project to “save” South Vietnam from communism. The Vietnam War is always cause for reflection, but with this dark anniversary in mind, I will publish a 3-part series, Defeat In Vietnam: Origins (Part 1), Resistance (2), and Consequences (3).
My guests will be the eminent historian Fredrik Logevall for Origins, 2024 Bancroft Prize-winner Carolyn Eisenberg for Resistance, and Jeffrey Engel and Jeremi Suri, two experts on U.S. foreign policy history, for Consequences.
All have appeared on the podcast before. You can listen here to Logevall tackle the question: Was Kennedy going to withdraw from Vietnam?
Last August, Eisenberg and I discussed her superb book Fire and Rain. In addition to listening to the podcast episode, you can read my book review here.
Suri, Engel, and I delved into the history of the Vietnam-era War Powers Act in this episode.
