Trump's consistent economic nationalism is not a recent phenomenon but is deeply rooted in the 1980s. He publicly railed against Japanese trade practices and high-profile investments in American assets, demonstrating that his protectionist instincts are a core, long-held belief.
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The post-1980s neoliberal consensus of small government and free trade is being replaced by a mercantilist approach. Governments, particularly the U.S., now actively intervene to protect domestic industries and secure geopolitical strength, treating trade as a zero-sum game. This represents a fundamental economic shift for investors.
The tariff war was not primarily about revenue but a strategic move to create an "artificial negotiating point." By imposing tariffs, the U.S. could then offer reductions in exchange for European countries committing to American technology and supply chains over China's growing, low-cost alternatives.
Public and political fear of Japanese economic takeover reached its zenith in the early 1990s, with books like Michael Crichton's "Rising Sun." Ironically, this coincided with the bursting of Japan's asset bubble, highlighting a critical lag between economic reality and popular discourse.
The anxiety driving protectionism in the West stems from seeing other nations catch up, not from an absolute decline in living standards. This psychological fear of losing the top spot undermines national confidence and can trigger a dangerous, self-defeating shift toward isolationism.
Current anxiety surrounding China is largely confined to policy and financial circles, lacking the broad public and pop culture resonance that characterized the fear of Japan's economic rise in the 1980s, which permeated movies, media, and consumer attitudes.
Unlike previous administrations that used trade policy for domestic economic goals, Trump's approach is distinguished by his willingness to wield tariffs as a broad geopolitical weapon against allies and adversaries alike, from Canada to India.
In an attempt to gain a currency advantage, Caterpillar lobbied the Reagan administration to open Japan's financial markets. This policy backfired, causing Japanese savings to flood into the U.S. and enabling competitor Komatsu to build factories directly on American soil.
During its boom, Japan's industrial policy and close bank-firm relationships were admired as strengths. After the bubble burst, these same traits were immediately relabeled as crony capitalism and systemic flaws, showing how quickly dominant narratives about national economic models can invert.
The shift away from the post-Cold War trade system started well before Trump. As early as 2009, the Obama administration recognized that the Doha Round framework was unworkable with China's economic model and began warning Beijing that the 'benign international environment' it relied on was at risk.
The "Japan panic" was rooted in fears of economic subordination—like having a Japanese boss or seeing landmarks bought by Japanese firms. In contrast, anxiety about China is dominated by concerns over direct military conflict and a technological arms race, a much starker form of geopolitical rivalry.