President Trump may have started a trade war in 2018, but he has been calling for one for at least 30 years.
Talking politics with Oprah Winfrey in 1988, Trump blamed an East Asian economic superpower for the United States’ problems. “They come over here, they sell their cars, their VCRs, they knock the hell out of our companies,” he said. “You can respect somebody who’s beating the hell out of you, but they are beating the hell out of this country.”
The “they” was not the economic boogeyman of the 21st century — China — but that of the 1980s: Japan, which had catapulted to the rank of the world’s second-largest economy mostly on the back of an aggressive export-oriented development strategy. In his characteristic style, Trump claimed that the Japanese were “ripping us off like no one has ever ripped us off before.” He then called Americans the “biggest suckers” and the “biggest dopes in the world” for buying so many Japanese goods while Japanese companies reaped enormous profits.
Trump’s solution? A 20 percent tariff on all Japanese imports, a policy that would have taxed hundreds of billions of dollars of goods produced in Japan.
“I’m not afraid of a trade war,” he boasted.
Although Trump never got his trade war in the 1980s, Japan’s rise to the status of an economic superpower, and its subsequent fall, offers lessons for the conflicts the president has provoked today. “Japan-bashers” such as Trump missed how the influx of Japanese commerce and culture was transforming social and economic life in the United States for the better, bringing jobs and goods that connected Americans to a rapidly globalizing world. Trump may have welcomed a trade war, but it would have threatened tens of thousands of American workers at new Japanese-owned manufacturing plants. With today’s heated rhetoric, we risk erasing those kinds of gains and throwing up barriers to future investment and progress.
The Cold War taught Americans to see international struggles in binaries: communism vs. capitalism, democracy vs. totalitarianism. Through this zero-sum lens, Japan became a convenient scapegoat whose successes explained Americans’ own economic struggles.
As the U.S. economy sputtered, the Japanese economy was reaching stratospheric heights, achieving unprecedented double-digit growth rates in the 1960s and surpassing the Soviet Union in output by the early 1970s. Japan’s industries, guided by powerful government bureaucracies, targeted overseas markets for expansion and growth. U.S. industries found themselves in the crosshairs — textiles, steel, television and automobile manufacturers all struggled to meet the Japanese challenge.
Given the deep well of anti-Asian prejudice, dating not only from World War II but also to the “yellow peril” panic of the 19th century, it was easy for Americans to reach for simple explanations amid growing anxieties.
And so, when Detroit automakers hemorrhaged hundreds of thousands of jobs in the late 1970s and early 1980s and blamed unfair Japanese competition, Americans believed it. After all, at the dawn of the 1970s, Japanese imports had accounted for just 6 percent of all U.S. car sales. A decade later, Japan controlled a quarter of the U.S. market.
But this explanation was more a cover employed by the Big Three car companies and their allies than a reflection of reality. The Big Three (General Motors, Ford and Chrysler) made catastrophic managerial decisions in the 1970s that resulted in vehicles that couldn’t compete with foreign models as gas prices soared and Americans desired smaller, more fuel-efficient cars. The result was mothballed factories and laid-off autoworkers.
But rather than accept responsibility for the job losses, executives in Detroit resorted to economic nationalism and urged political leaders to impose restrictions on foreign competition. And it worked. In 1981, under pressure from the new Reagan administration, Japan agreed to “voluntary export restraints” on automobiles — effectively a quota system — to head off potential tariffs or regulations.
Politicians in both parties, manufacturers and labor unions such as the United Auto Workers fueled fears of a “coming war with Japan,” as the title of a 1991 book put it. On the campaign trail in 1992, Democratic presidential candidate Paul Tsongas famously told crowds, “The Cold War is over, and Japan won.”
But this anxiety totally missed the mark. In actuality, the thriving Japanese economy benefited American consumers and workers. And these trade threats and barriers to foreign competition risked hurting Americans.
Beginning with a Honda assembly plant in rural Marysville, Ohio, which opened in 1982, Japanese manufacturers actually helped restore the economy in places where a decade of deindustrialization and job loss had crushed it. As Honda brought thousands of good middle-class jobs to Marysville over the next decade, the unemployment rate fell from the high teens to about 3 percent, and the county went from one of the poorest in the state to one of the wealthiest.
Similar stories unfolded in the 1980s in Georgetown, Ky., where Toyota settled, and Smyrna, Tenn., where Nissan set up shop. These projects brought their share of problems — chief among them, hostility to unions — but they also brought development to regions desperate for an injection of capital. And a trade war risked sending it all back to Japan.
The notion that the Japanese were unfairly cheating American manufacturers also missed why Americans were increasingly engaging with Japanese products. They liked Hondas and Toyotas because they were more efficient and dependable than Detroit’s vehicles; they relished the ability of the Sony Walkman and VCRs to transform their relationship to the audio and visual worlds; they ate sushi because it made them feel cosmopolitan; and they even created fan clubs to celebrate Japanese popular culture, particularly Japanese animation, or anime.
Calls for a trade war missed these benefits Americans were experiencing from nascent globalization. And they also wildly overinflated the threat posed by Japanese competition.
By the mid-1990s, Japan’s bubble economy, fueled by reckless real estate speculation, had popped, leaving the country mired in a “lost decade” of flat or negative economic growth. The U.S. economy, on the other hand, surged, taking advantage of an information-technology revolution that propelled U.S. companies across new global horizons. Smaller, nimbler U.S. firms were better positioned to take advantage of that revolution than were the massive inflexible Japanese conglomerates that had conquered global markets a decade before but were slow to adapt to rapid technological change.
Today, Trump seems poised to make the same mistake he made in the 1980s. His vows that the United States can successfully wage a trade war are premised on the notion, embedded in economic simplifications such as “trade deficit,” that national economies are self-contained entities that can exist and thrive independent of interconnectedness. But history has proved time and again that this isn’t the case. And today, there are just as many risks to a trade war as there were in the 1980s. Places such as Spartanburg, S.C., where BMW manufactures many of its vehicles, stand to lose big time.
That is why Trump should embrace the ideas of wiser critics from the 1980s who actually understood the economic reality that he flubbed — people such as future labor secretary Robert Reich, who argued that change began at home, that the best way to future-proof an economy was not to build barriers between it and the world but to invest in the kind of education and training that would make a population flexible in the face of future challenges. That is the formula that will propel the American economy to new heights — not a trade war.