WASHINGTON (AP) — President Donald Trump is going to Japan and South Korea next week to promote an epic financial windfall — at least $900 billion in investments for U.S. factories, a natural gas pipeline and other projects.
Japan and South Korea made those financial commitments in August to try to get Trump to ratchet down his planned tariff rates from 25% to 15%. But as the U.S. president is set to depart Friday night for Asia, the pledges are more of a loose end than money in the bank for American industry.
Japan pledged $550 billion in investments, but it wants the money to benefit its own companies, making that a condition in a memorandum released in September. As of Monday, Japan has a new prime minister, Sanae Takaichi, who has expressed respect for Trump but is operating in an untested coalition government.
South Korea offered $350 billion — but wants a swap line for U.S. dollars to facilitate its investments and seeks to fund the transactions through loan guarantees. Otherwise, the commitment could sink its own economy.
The investment arrangements are unusual for trade frameworks, and Trump maintains that he will personally direct how the money is spent, enabling him to pick winners and losers. Weeks of talks have yet to produce any breakthroughs on how the investments would go forward even though both nations want to preserve their relationship with America.
Still, ahead of the trip, Trump was radiating optimism that his tariffs had forced investments to fuel what he believes will be an economic boom starting next year.
“We’ve done well, as you know, with Japan, with South Korea,” Trump told Republican senators Tuesday. “Without the tariffs, you could have never made the deal. I’ll tell you what. Tariffs equal national security.”
Countering China’s manufacturing might
For Trump, the investments are also about demonstrating America’s strength before a planned meeting with Chinese leader Xi Jinping while he is in South Korea. U.S. Trade Representative Jamieson Greer on Monday described Trump’s strategy in part as “encouraging allied investment in America’s industrial future” to counter Chinese manufacturers.
But Japan and South Korea are also competing against China — which is pivoting aggressively into electric vehicles, computer chips and other technologies. There is a risk that mandating investment in the U.S. could weaken allies that are closer geographically to China, said Christopher Smart, managing partner at the Arbroath Group, a geopolitical strategy firm.
“They need to invest in their own countries,” said Smart, who was a senior economic aide in the Obama White House. He said Trump was “going to extract investment money” from the countries while also erecting “tariff walls” that could make it harder for them to sell goods in America, a rather lopsided view of how alliances work.
