Weaponisation of trade policy must end

A phenomenon known as the “weaponisation” of trade policy is spreading around the world.

- MOTOSHIGE ITOH

The administration of US. President Donald Trump has been using the threat of higher import tariffs to force concessions from foreign countries in negotiations, an effective tactic because those countries would suffer if they lost their profits from the massive U.S. market.

Japan’s ultimate goal in the tough negotiations with the United States over Trump’s tariffs was to avoid losing the key export market for Japanese cars due to Trump’s plans to impose sharply increased tariffs on them. The United States achieved a major success in the bilateral negotiations by making Japan increase its U.S.-bound investments. In other words, Trump successfully earned profits by utilizing trade policy as a weapon.

The United States is not the only country to do this. China has used restrictions on exports of rare earths, known as the strategically important “vitamins of industry,” thereby ensuring that trade negotiations with the United States would go in its favour. If China’s rare earth shipments were to stop, the immediate consequence would be that the manufacturing of many products in the US would come to a halt.

China has a high share of the global output of rare earths, so it has resorted to using this choke point as a weapon. When the issue of the Senkaku Islands came to the fore in 2010, China wielded the threat of restricting rare earth exports to pressure Japan.

The advancement of globalization has heightened many countries’ dependence on exporting their goods abroad and importing raw materials. This, in turn, has made them vulnerable to significant economic harm from restrictions on exports and imports.

The weaponization of trade policy is rampant, therefore, as nations take advantage of this situation. Major powers like the United States and China are especially prone to using trade policy this way.