Trump’s Japan Negotiation Strategy: Implications for Taiwan

In his negotiations with Japan last week, President Donald Trump drew on his business background and deal-oriented mindset, deploying a strategy of maximum pressure diplomacy. One could describe the approach as demanding an outrageous price but settling for a mere premium and one that bore all the hallmarks of a con artist, ultimately forcing Japan to make concessions in the agricultural and automotive markets. Although it was packaged as a “win-win,” in reality the deal was an asymmetric transaction dominated by psychological warfare, with Trump’s threat of punitive tariffs at its core.

Trump’s strategy hinged on setting an extremely high negotiating threshold: He threatened to impose a 25% tariff on Japanese automobile imports, placing Japan under intense psychological pressure. Subsequently, he offered limited concessions in opening up the agricultural market, such as lowering tariffs on high-priced alcoholic beverages and fruit, leading Japan to accept a lopsided agreement. He further emphasized unilateralism and brought pressure to bear on areas that would directly benefit American farmers and working class voters, thereby ensuring domestic support.

From a substantive point of view, Japan’s agricultural and automotive concessions will generate medium to long-term challenges. Agriculture, in particular, will face difficulties, as local and small-scale farmers get hit by low-priced American agricultural products. And while the automotive industry will not immediately be affected, the fact that it was used as a bargaining chip in the negotiations increases policy risks and uncertainty. However, since Japan had long prepared for developments in the agricultural sector, and Japanese consumers have never been particularly keen on American cars, the market responded with short-term optimism. On the day of the negotiations, Japanese stocks surged by 1,500 points, reflecting positive investor readings that the worst-case scenario had been averted. This outcome helped mitigate the immediate impact of the trade war, but in the medium to long term, the high price of these concessions and unresolved structural pressures will undermine the competitiveness of Japanese industry.

Taiwan, likewise an export-oriented economy, will have to carefully evaluate its response options under different tariff levels if confronted with a similar extreme pressure strategy. If the U.S. starts high and ends low, ultimately imposing only a 10–20% tariff, then on the face of it, Taiwan will have achieved a tariff reduction “victory.” But if this comes at the cost of concessions in key sectors such as agriculture, information and communications technology, or semiconductors, it will effectively constitute a forced compromise — one that will seriously erode industrial autonomy and policy space.

Conversely, tariffs between 20% and 30% would constitute a textbook example of extreme pressure. If Taiwan opts for a targeted easing of restrictions to stabilize exports, it may avoid short-term risks but trigger industrial backlash and social pressure. The offshoring of its domestic enterprises could intensify, and problems such as internal demand imbalance and job losses emerge.

If tariffs were to exceed 30%, this would mean a de facto trade war. If Taiwan chooses to hold the line and not concede its core industries, exports may suffer in the short term, but opportunities for industrial upgrading and market diversification could arise, such as by shifting toward the ASEAN and Indian markets and by strengthening the resilience of domestic supply chains and local demand.

In short, Trump frequently bluffs and issues extreme threats — such as imposing 50% tariffs and withdrawing from the World Trade Organization — to create catastrophic expectations and force his opponents to make concessions under intense pressure. He is also adept at sending ambiguous signals through social media to sow confusion among markets and negotiation counterparts alike, having employed similar tactics in negotiations with China, Japan, Mexico, Canada, among other countries. Tough and controversial though these tactics may be, they have proven remarkably effective in consolidating political support and quickly reaching agreements.

For any country, Trump-style negotiations pose a challenge, not just to economic interests, but also in terms of psychological resilience and strategic endurance. Taiwan should proactively put contingency mechanisms in place, including industrial compensation, crisis communication and multilateral coordination capabilities. At the same time, it should strengthen both its voice and influence in public discourse and its economic safety net. This will help Taiwan avoid traps that appear to be win-win but actually result in sacrifice, allowing Taiwan to remain steadfast in protecting its core interests amid international pressure.

The author is president of Taiwan’s Asia Pacific Research Foundation