Via Zerohedge

President Trump’s visit to Japan may not be the “biggest thing to happen there in 200 years” as the president was misquoted as saying by certain media outlets earlier this week, but that won’t stop traders from paying rapt attention to everything he does or says, as the prospect for more pulse-quickening trade headlines looms over the long holiday weekend.


In that regard, the president’s planned four-day visit isn’t off to a great start: The Associated Press reports that Trump opened his state visit by “needling” Japan over its trade imbalance with the US. “I would say that Japan has had a substantial edge for many, many years, but that’s OK,” Trump said, joking that “maybe that’s why you like me so much.”

If it weren’t for the trade standoff with China, this jab would have slid under the radar as an otherwise innocuous joke. But given the administration’s rhetoric about auto tariffs, many remain anxious.

Like with China, the US has for decades registered a sizable trade deficit with Japan, something that was at the root of several trade skirmishes that unfolded during the Reagan years, where the Gipper won huge concessions (for more background on that, see this WSJ Saturday Essay from December).


In what could be characterized as an attempt to pick up where Reagan left off, Trump has threatened Japan and the EU with “potentially devastating” tariffs on autos and auto parts, and has hinted that his administration will move forward with the trade penalties if US Trade Rep Robert Lighthizer fails to win concessions. Although the administration announced last week that a final decision on auto tariffs won’t be made for another six months, with Trump, there’s always the chance of an off-the-cuff remark provoking a market panic.

READ ALSO  SE: Consumers Spend $5.1B Online on Thanksgiving Day says Adobe's Copeland

To mitigate this risk, Japanese Prime Minister Shinzo Abe has reportedly planned the trip explicitly to flatter Trump, which has worked for Abe in the past. Trump will be the first foreign leader to meet the new emperor following the first abdication in 200 years. He will also present a trophy at a Sumo Wrestling championship that Trump boasted was “bigger than the Superbowl.” The two leaders are also planning to hit the links, and Trump will be the guest of honor at a state dinner presided over by Naruhito, the new emperor. Furthermore, a handful of Japanese companies have already said they plan to cut ties with Huawei, a sign that Japan is siding with the US in its trade war against China – something that has evidently engendered some bitterness in Beijing, as evidenced by the following tweet:

As the Washington Post reports, if Abe’s goal was to preserve the bilateral alliance through flattery, he appears to have succeeded:

Yet if Abe’s goal was to use the emperor’s succession to flatter Trump in service of preserving the bilateral alliance, it appeared to be paying dividends. During an impromptu question-and-answer session with reporters in the Roosevelt Room on Thursday, Trump was asked whether the United States and Japan could reach a trade deal to avoid tariffs on Japanese automobiles that the president has threatened to enact in six months.

Instead of responding directly, Trump pivoted to boast again about the “very big thing going on with the emperor” and then, perhaps, revealed the real reason he is so enthusiastic.

“I am the guest, meaning the United States is the guest, but Prime Minister Abe said to me, very specifically, ‘You are the guest of honor. There’s only one guest of honor,'” Trump said. “I represent the country. Of all the countries in the world, I’m the guest of honor at the biggest event they’ve had in over 200 years.”

In other words: If Trump doesn’t open up another front in the trade war this weekend, traders will have Abe to thank.

READ ALSO  Spain's Sabadell mandates Goldman Sachs to sell its British unit TSB - source