The Hill, “Trump: Japan ties could sour when ‘I tell them how much they have to pay”, 6 Sept 2018:

President Trump touted his good relations with Japan on Thursday but warned the relationship may sour over trade.

“Of course that will end as soon as I tell them how much they have to pay,” the president said of his strong ties with Japan in a call to Wall Street Journal assistant editor James Freeman.

Freeman shared the president’s remarks in a WSJ op-ed published Thursday. Freeman said Trump had called him shortly after the editor appeared in a segment on the Fox News Channel praising the president for the strong U.S. economy.

Trump’s comments about Japan come as the U.S. finds itself in a number of trade fights with allies and other countries.

Trump has slapped tariffs on imported steel and aluminum. And he has threatened new tariffs on auto imports. Japan’s trade minister in August warned the country could possibly retaliate.

Trump last week announced a trade deal with Mexico to replace the North American Free Trade Agreement. The U.S. is separately negotiating with Canada but both countries have dug in during the contentious talks.

Trump has warned he is willing to go ahead and sign the deal with Mexico if Canada does not get on board.

“[T]here is no political necessity to keep Canada in the new NAFTA deal,” Trump tweeted last week.

Canadian Prime Minister Trudeau has vowed his country is “not going to accept is that we should have to sign a bad deal just because the president wants it.”

Trump is also escalating a trade war with China. Trump has floated another $200 billion in tariffs on Chinese goods.

Stratford, “Japan’s Built-in Resistance to Pressure”, 5 Sept 2018:

Past protectionist pushes by the United States prompted Japan to build up a degree of insulation that could help it weather the current tariff threat. Even as it pursued its Cold War-era strategy to build up the Japanese economy as a U.S. bulwark in the Pacific, the United States moved to protect the U.S. domestic sector from Japanese competition. In the 1970s, the United States piled pressure on Japan, which ultimately agreed to self-imposed voluntary export restrictions on automobiles, which lasted from 1981 to 1994. This squeeze on Japanese automakers spurred a flurry of joint ventures and the movement of Japanese production onto U.S. shores.

Between 1978 and 1989, the top seven Japanese carmakers each set up production in the United States — an acceleration that gathered momentum with production of Japanese cars climbing from 620,000 units in 1986 to 2.15 million by 1994. This trend of increased Japanese manufacturing in the United States has continued to strengthen. The number of vehicles manufactured by Japanese carmakers in the U.S. rose from 3.3 million to nearly 4 million between 2006 and 2016. And of the 20 most popular light-duty vehicles sold on the U.S. market, five were Japanese models containing upwards of 50 percent of components produced in the United States.

The strong onshore presence of Japanese production facilities will partly blunt the effectiveness of the tariff tactics as the United States presses Japan to enter a bilateral dialogue. Japan still holds out hope that it can persuade the United States to reverse course on its abandonment of the CPTPP. This trade agreement fits more into Japan’s overall strategy in the Asia-Pacific to counter China’s rise by pulling the Asia-Pacific region’s economy more closely into both the U.S. and Japanese orbits. During the most recent high-level meeting of U.S. and Japanese trade officials on Aug. 9 — more than two months after the auto tariff threat — Japan continued to seek a U.S. return to the CPTPP, and the United States continued to push for bilateral talks. Instead of caving to U.S. pressure, Japan has offered up expanded investment, increased purchases of U.S. natural gas and large-scale military procurements in hopes of mollifying Washington by chipping away at the trade deficit.

Chinese Premier Li Keqiang, right, visited Tokyo in May where he agreed with Prime Minister Shinzo Abe to cooperate on investment in infrastructure projects overseas.  Reuters

Asian Review, “Japan and China take first step toward joint infrastructure abroad”, 4 Sept 2018:

Thai high-speed rail among candidates to be discussed at inaugural committee this month

TOKYO—Japan and China are moving ahead with their plans to cooperate on overseas infrastructure projects, with a newly established public-private committee scheduled to hold its first meeting in late September in Beijing.

A high-speed rail project in Thailand is seen as the first candidate for cooperation.

Japanese Prime Minister Shinzo Abe and Chinese Premier Li Keqiang met in Tokyo in May and agreed to cooperate on infrastructure projects in third countries. Abe is considering visiting China in October and seeks to reach agreements on specific projects there.

Japan aims to avoid excessive competition with China on infrastructure projects by collaborating. Showing support for Beijing’s Belt and Road Initiative could also lead to better bilateral ties. China, for its part, seeks to avoid being labeled overseas as a disreputable investor by bringing Japan on board.

The public-private committee’s first meeting will be led by Hiroto Izumi, special adviser to the prime minister, from Japan, as well as Gao Yan, a vice minister of commerce, and Ning Jizhe, a vice chairman of the National Development and Reform Commission, from China. Senior officials from Japan’s top business lobby, Keidanren, will also participate.

The committee discussion will form the basis for a high-level bilateral forum on cooperation to take place when Abe visits China. Tokyo and Beijing are planning to sign memorandums of understanding on 20 to 30 projects then.

The high-speed rail project aimed at connecting Thailand’s three main airports is seen as the likely candidate for their first collaboration. The project is central to the country’s eastern economic corridor development plan and is expected to cost over $45 billion. A subcommittee will be created under the new committee to draft a concrete plan, with Beijing and Tokyo aiming to participate in an international auction to be held as early as the end of this year.

Japan and China will also consider partnerships between their companies for solar power orders from overseas and delivering power plants to other countries through Sino-Japanese joint ventures. Tokyo and Beijing will also explore cooperation in such fields as finance, health care and startup funding.

The two countries are increasingly competing to finance Asia’s demand for infrastructure, which the Asian Development Bank estimates at $26 trillion from 2016 to 2030.

Excessive competition, however, could hurt both sides. Countries can try to play Japan and China off each other to extract better terms, such as lower interest rates. Beijing is particularly susceptible to this, since its priorities are thought to lie in securing orders for Chinese companies and expanding its political influence.

The $200 million China-Maldives Friendship Bridge, for instance, was mostly funded by Chinese money and built by Chinese companies. Profitability has been an afterthought, as Maldives President Abdulla Yameen seeks to tout successes ahead of a presidential election in September and China aims to bolster its sway over the geopolitically significant island nation.

Japan and China are expanding their power struggle in the Asia-Pacific region on both the economic and security fronts. Tokyo has promoted its Free and Open Indo-Pacific Strategy in response to Beijing’s Belt and Road Initiative as the two continue their geopolitical battle.

It remains to be seen whether their collaboration is more than temporary, since their joint effort on infrastructure is aimed at improving relations ahead of their leaders’ reciprocal visits this year and next.

China’s trade war with the U.S. seems to have nudged Beijing toward cooperation with Japan. If China’s standing in the international community changes, it could again move to reassess the bilateral partnership.