Why Japan, South Korea and EU couldn’t join forces against Trump

Before the Trump administration’s August 1 deadline, Japan, South Korea and the European Union struck agreements with the United States, accepting American tariffs of 15 per cent on their exports. They all came with strings of promised investments in the US attached. While the agreements looked like capitulation at the time, these governments may be breathing sighs of relief in light of the latest tariffs US President Donald Trump has imposed on Canada, Brazil and India. But 15 per cent is still higher than the 10 per cent baseline rate enjoyed by Russia, Iran, the UK and Australia. Leaving aside the potential long-term damage to US industries and consumers, Trump may congratulate himself on prevailing against major trading partners. After threatening them with high tariffs, he pushed them into accepting more “reasonable” one-way tariffs. From Trump’s perspective, these are fair consideration for the security protection the US has long provided to its Asian and European allies. It is against this backdrop that these allies could not drive harder trade bargains. Trump was able to divide and conquer these major economies. The deal Japan reached essentially set a benchmark for the EU and South Korea to follow. Unlike China, these economies are all major auto exporters to America. With Chinese EVs facing tariffs of more than 100 per cent, China does not sell many cars in the US. During the Cold War, the US allowed Japan and South Korea one-way access to its vast auto market, arguably at the expense of its domestic car industry. Since the late 1980s, Trump has been fascinated with tariffs, triggered by the perceived injustice with Japan. Thus, they should be seen as his attempt to redress the historical imbalance. Nevertheless, Japan, South Korea and the EU all have cards to play in negotiations with the US – for example, the EU’s vast market scale. So why did they fail to use their cards decisively? In fact, they are all hampered by internal problems: domestic politics in Japan and South Korea, and the EU’s need for coordination among a large number of member states. Japan’s Prime Minister Shigeru Ishiba leads a minority government with weak domestic standing. Having lost the Lower House majority in October 2024, the ruling coalition lost control of the Upper House last month, shortly before the August 1 deadline. Days after Trump launched his global tariffs in early April, South Korean President Yoon Suk-yeol was formally removed from office. From the arrest of Yoon in January to the inauguration of President Lee Jae-myung on June 4, this was a long period of political uncertainty. The Korean government also made a turn from conservative to liberal – with implications for relations with the US and China. The EU has to coordinate the divergent interests of member states. In the midst of the Ukraine war, where continued US support is essential, the EU cannot afford too hard a confrontation with Trump. In July, EU Commission President Ursula von der Leyen faced – and survived – a censure motion and saw a major setback in her attempt to push through the 2028-2034 Multiannual Financial Framework, weakening her authority. In contrast, China was able to handle the US in a more strategic and coherent manner. The EU, Japan and South Korea could have strengthened their bargaining positions by coordinating with one another. Yet, in a classical prisoner’s dilemma, the impediments to cooperation are too high. The trust deficit among these economic competitors is compounded by history and geography. Furthermore, while their economic hands may be strengthened by coordination with China, the geopolitical misalignment is too large to overcome. The case for coordinated bargaining may be more compelling among selected nations in the Brics grouping. Both Brazil and India face high US tariffs. India has been slapped with additional tariffs for buying Russian oil; China may be next. Trump may end up pushing India towards China. Indian Prime Minister Narendra Modi will visit China at the end of the month for the Shanghai Cooperation Organisation summit. While India may be more competitive in services, it still exports a lot more goods to the US than services. Some key exports such as jewellery and apparel are non-essential or replaceable. Unlike China, India does not have supply chain dominance in many critical industries – other than in generic pharmaceuticals. Moreover, as a highly protected market, India does not have the moral high ground. In this context, New Delhi has limited negotiation leverage against Washington. India could strengthen its negotiating position in coordination with China. Their interests are aligned as they are both key buyers of Russian energy. To compensate for a more restricted US market, they could further open their markets to each other. For example, many Chinese apps such as WeChat and TikTok are presently banned in India. And if China would open its market more to Indian chemical and pharmaceutical imports, significant trade growth could be expected. Collaboration on biopharma should be a win-win. As measured by the immediate concessions that have been extracted, Trump’s divide‑and‑conquer strategy seems to have been a success. However, the settlement is inherently fragile. While the ambitious and ambiguous investment promises may provide Trump with bragging rights, the real test lies in their implementation. The relief felt by Japan, South Korea and the EU may prove fleeting. Furthermore, such economic coercion may push some economies towards coordination. Trump may unwittingly foster the rapprochement of China and India, potentially accelerating the formation or strengthening of competing trade blocs.

Why Japan, South Korea and EU couldn’t join forces against Trump

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}It may be easier for selected countries in the Brics grouping to collaborate to counter the US than for Tokyo, Seoul and Brussels to do so

It may be easier for selected countries in the Brics grouping to collaborate to counter the US than for Tokyo, Seoul and Brussels to do so