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(Bloomberg) -- Japan’s economy risks taking another hit if US President Donald Trump slaps fresh tariffs on China, sparking a renewed US-China trade war, according the government’s chief economist.
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“If a US-China trade war leads to higher tariffs, it’s likely to negatively affect Japan’s economy, based on past experience,” Tomoko Hayashi, chief economist at the Cabinet Office, said in an interview with Bloomberg.
Still, Japanese companies may be a little better prepared to deal with the fallout from Trump’s policies this time than they were during his first administration, given a widening of supply chains and more familiarity with the president’s tactics, Hayashi said.
Hayashi was one of the main government analysts assessing the economic impact of Trump’s policies during his first term.
The comments come as policymakers, investors and economists keep a close eye on Trump’s trade policy amid fears that his threatened use of tariffs could batter global commerce and confidence in the growth outlook.
Trump announced Thursday plans to impose a 25% tariff on goods from Mexico and Canada from Saturday, along with a possible 10% tariff on Chinese imports. Further use of tariffs is expected as the president uses levies on trade as one of the key negotiating instruments for pursuing his America First agenda.
Hayashi’s team points to a 7.1% slide in Japan’s exports between the second quarter of 2018, just before Trump’s first tariff salvo, and the first quarter of 2020 as evidence of the fallout from the US-China trade war at the time. Most of the impact was indirect, affecting exported components from Japan used in products assembled in China and shipped to the US.
Annual figures show Japan’s exports to China fell 7.6% in 2019 in the first full year of Trump’s tariffs. That was the worst drop since bilateral ties between the two Asian nations were strained in 2012 during a spat over islands in the East China Sea controlled by Tokyo but claimed by Beijing.
Hayashi said Japan could face a similar fate from US tariffs on China, second time around, though companies may be better prepared for disruption.
“Having learned from past experience, some Japanese firms have already put countermeasures in place, such as adjusting supply chains and stockpiling inventory,” Hayashi said.