Written by Timothy Enoni Hasmeru Halawa and Joel Sebastian Purba
MAKE AMERICA GREAT AGAIN, BUT NOT FOR THE WORLD
After Trump announced that he would impose various tariffs on many countries, the queue for negotiations piled up. The fact that the United States is a market with potentially high profits due to the capacity of its consumers has driven many countries to engage in trade and investment with it (Gilpin, 2001). Moreover, with the adoption of a free market, the United States became an open and fertile trading ground for everyone. Therefore, when Trump imposed those tariffs, countries that had cultivated their efforts in the U.S. market faced a significant risk of loss and economic consequences.
Not just once but twice, Japan failed to reach an agreement on tariff reductions through negotiations with Washington. These tariffs have placed a heavy burden on Japan’s economy, as the U.S. is one of its main export markets (followed by China). Trump imposed strict demands on Japan, evident in the imposition of tariffs beyond the baseline and reciprocal tariffs, such as tariffs on manufacturing and other products—especially staple goods like rice. Pyle (2007) noted that the U.S. has long been a crucial export market for Japanese manufactured goods, even contributing to Japan’s post-war economic development.
The reason behind the implementation of these various tariffs was Trump’s desire to “Make America Great Again” (MAGA). This Desire is rooted in a Belief that America can be considered “great” if it dares to prioritize its domestic interests (America First) and reestablish itself as a manufacturing powerhouse. The application of these tariffs is a tangible expression of that Belief—by limiting (not shutting down) foreign producers to create room and opportunities for domestic ones.
On April 2, 2025, which Trump commemorated as “Liberation Day,” he announced that tariffs would be categorized into several types, including a baseline tariff of 10% imposed on all countries, a 25% manufacturing tariff on cars and automobile, and a reciprocal tariff that varied based on the economic reciprocity other countries provided the U.S.—measured by U.S. economic metrics. These tariffs took effect on April 3, 5, and 9, respectively. However, the reciprocal tariff was delayed for 90 days to allow room for affected countries to negotiate, while the other tariffs remained in effect.
The major impact of the tariffs on Japan fell on its manufacturing sector. Japan is the second-largest exporter of cars to the U.S. Consequently, the tariffs affected the profits and market share of Japanese car manufacturers, raising the risk of reduced production and job availability (Hufbauer, 2006). These effects started to become visible in the form of declining demand, slowed export growth, and reduced industrial production due to concerns over competitiveness (Mahardhika, 2025; Maekawa, 2025; Noridansyah, 2025). This economic harm was later acknowledged by PM Ishiba Shigeru, who called it “a national crisis” (Planasari, 2025). Hence, immediate negotiations were necessary to reach a beneficial agreement.
This article first discusses the diplomacy and negotiation process between Tokyo and Washington, highlighting Japan’s “missteps” when initiating talks with the U.S. Second, it reviews one of Japan’s key negotiation cards—its substantial holdings of U.S. bonds—and argues that this should be taken into account by Washington in decision-making. The article concludes that the U.S. effectively “ghosted” Japan’s interests.
TOKYO-WASHINGTON NEGOTIATION BATTLE
Negotiation is a joint decision-making process through interaction. In international negotiations, there is a binding relationship between state-actors, organizations/agencies, and individuals/agents. This means agents can only act if supported by agencies and actors; agencies cannot function without agents and actors; and actors cannot interact without agencies and agents to represent them (Fauzullaev, 2014). Through this interdependence among actor-agency-agent, we can symbolically discern a nation’s intentions through its chosen representations. Fearon (1995) explains that the diplomatic envoy’s rank sends a direct signal of the sending state’s priorities and its desire to expand political capital in the relationship or negotiation.
President Trump and Prime Minister Ishiba represented the U.S.–Japan relationship. However, since both assumed office, their bilateral ties have been ambiguous. Issues like Ishiba’s failure to reach Trump, a five-minute phone call, and two postponements of his request to meet Trump in Washington, raise strong assumptions that Trump was uninterested in building close diplomatic relations with Ishiba—who, conversely, showed great willingness. Although Ishiba eventually met Trump in Washington, the meeting did not address tariffs at all. Tokyo interpreted this as a signal that Trump would cooperate with Japan and reconsider the tariffs. Yet, three days later, Washington unexpectedly imposed aluminum tariffs on Japan.
This led to opinions that Tokyo lacked the courage to confront Washington, leaving Japan cornered—confirmed after the tariffs were enacted. With neither sufficient political capacity nor the courage to use it, Japan seemed unlikely to gain favorable outcomes in future negotiations with the U.S., possibly even closing the negotiation without results.
With a shaky foundation—that is Ishiba’s failure to build strong ties at first with Trump—on March 10, Tokyo sent Yoji Muto, the Minister of Economy, Trade, and Industry (METI), to Washington for negotiations. This dispatch demonstrated Tokyo’s seriousness (or desperation) to engage directly at the ministerial level, meeting U.S. Trade Secretary Howard Lutnick, USTR Jamieson Greer, and White House economic advisor Kevin Hasset. Since no agreement was reached, further negotiations were held on March 27 by METI’s vice minister and the Foreign Minister of Japan, but again yielded no significant result. One major flaw in Tokyo’s first-round effort was the delegation’s unpreparedness. A senior METI official noted, “The details of the announcement [on tariffs] were completely different from what we had been told in advance…This is not what we anticipated” (Abe, 2025).
Heading into what could be called the Tokyo–Washington negotiation battle, Scott Bessent (U.S. Treasury Secretary) and USTR Greer were appointed as the official U.S. representatives for negotiations with Japan. The seriousness of the U.S. response seemed evident in appointing these high-ranking officials. However, considering the Japanese delegation’s capability, Bessent and Greer may have served as a high wall—intimidating Tokyo into potentially surrendering the talks.
Ryosei Akazawa, Minister of Economic Revitalization, was chosen as Japan’s chief negotiator. His experience in negotiating with the U.S. during Obama’s and Trump’s first term was cited as the rationale. However, controversy over his appointment raised doubts: was he the “prince” for this negotiation battle or merely a scapegoat? Some assumed that Akazawa was selected not out of merit, but because no one else was capable or politically viable (The Yomiuri Shimbun, 2025a).
The first round of the Tokyo–Washington negotiation battle, represented by Akazawa versus Bessent and Greer, took place on April 16. Learning from previous missteps, Akazawa came prepared. He sought to make the talks more constructive and not rushed, aiming to coax Washington into disclosing its full demands so that the tariff issue could be resolved carefully. However, a surprise came the day before: Trump announced he would attend the negotiation, moving the meeting from the Treasury Department to the White House. Instead of dealing only with ministers, Akazawa now had to face Trump directly—a rare event in diplomatic protocol (Press, 2025).
Trump’s presence aimed to directly tell Akazawa that Japan had been unfair in its trade with the U.S. He emphasized the scarcity of American cars in Japan and accused Japan of lacking reciprocal trade—especially in agriculture—leading to a U.S. trade deficit. His statements were considered exaggerated, but Akazawa, determined to reach a favorable deal, faced him calmly and with preparation (Shimosato & Nakata, 2025).
Despite touching on several requests—such as increased imports of rice and potatoes and the removal of non-tariff barriers on automobiles—the U.S. had not yet presented a demand that could serve as a mutually agreeable focal point. Though the negotiation was deemed “constructive,” it still left things murky (Shimosato & Nakata, 2025). Some observers saw Trump’s presence as an effort to “better understand the counterpart” (Press, 2025). However, this article argues that Trump’s attendance—along with the appointment of Bessent and Greer—signals that Japan faces a high wall, making it unlikely that a tariff resolution agreement can be reached. Even Akazawa admitted, “With the president himself showing up [for the talks], it is clear that he wants to get things done quickly” (The Yomiuri Shimbun, 2025b).
Since the first round failed to yield the desired outcome, Akazawa returned to the U.S. for follow-up negotiations from April 30 to May 2, alongside Bessent and other officials. In this second round, Tokyo appeared more assertive, demanding the removal of reciprocal, automotive, and steel tariffs—reinforced by Japan’s agreements and economic contributions to the U.S., including the bonds that will be discussed in the next section of this article.
Despite these efforts, Washington deemed the proposals insufficient to justify lifting tariffs. At most, it was willing to consider reducing them or extending the 90-day delay. Additionally, it asked Japan to further open its automotive and agricultural markets to U.S. goods—something difficult for Japan, given the lack of domestic demand for U.S. products.
Not once but twice, Japan failed to reach a tariff reduction agreement with Washington. Through aggressive policies and principles, the Trump administration signaled to many countries that they were facing a high wall when attempting to negotiate on U.S. economic and trade policy. Trump stated that other countries needed the U.S., not the other way around (Kuroki & Shimosato, 2025). This is rooted in the “America First” principle, which prioritizes U.S. interests over the world’s. Trump’s “America First” stance leads the author to suspect that the U.S. effectively “ghosted” Japan—suddenly excluding Japanese (and other countries’) interests from its considerations (as seen also in decisions regarding USAID).
THE HEAVY NEGOTIATION CARD BY JAPAN
To comprehend more about this issue, we must first understand the concept of international obligations, which serve as the foundational principles guiding how states interact with one another in the global system. At its core, an obligation is a duty or commitment that a state is bound to fulfill. In international law, obligations emerge from various sources, including treaties, customary law, and general principles of law recognized by nations. These obligations ensure predictability, cooperation, and accountability between sovereign nations (International Monetary Fund, 2022).
International obligations can be broadly categorized into three interrelated domains: legal, diplomatic, and financial.
Legal obligations refer to binding commitments that arise from international agreements or conventions. These include treaties (like the Paris Agreement or WTO agreements), which function similarly to contracts between countries. Once a state ratifies a treaty, it is legally bound to uphold its terms. Failure to do so can result in diplomatic consequences or sanctions. Additionally, there is customary international law, which consists of unwritten norms derived from consistent state practice and a sense of legal duty (opinio juris). An example would be the prohibition against genocide or the obligation to respect diplomatic immunity.
Diplomatic obligations, while less formal than legal ones, are essential in maintaining stable international relations. These are based on mutual expectations, traditions, and informal agreements that help build trust between nations. They may include the commitment to consult allies before major actions, or to act in good faith during bilateral negotiations. Though not always codified, violating diplomatic obligations can seriously damage a country’s reputation or weaken strategic alliances.
Financial obligations relate to the economic commitments that states undertake, often through sovereign debt, international loans, and monetary agreements. These obligations are particularly significant in the modern era of globalization and interdependence. A country’s financial credibility—reflected in its ability to service debts and honor bond payments—affects its access to global capital markets and its standing in international financial institutions like the International Monetary Fund (IMF) or World Bank.
Understanding these obligations is essential because they shape how countries behave, especially in power asymmetries—when one country has economic leverage over another. In this case, Japan holds a significant amount of U.S. Treasury securities, making it one of America’s largest foreign creditors. This financial position grants Japan not just investment returns, but also potential political leverage in trade or diplomatic negotiations, particularly when tensions arise, such as during tariff disputes.
According to the Congressional Budget Office (2023), the U.S. federal government consistently runs budget deficits, spending more than it collects in revenue. Treasury securities, especially those held by foreign nations like Japan are vital to closing this fiscal gap. The borrowed money is used to fund a wide array of essential government services, including infrastructure, social security, defense, healthcare, and economic stimulus programs. In short, debt, particularly foreign-held debt, functions as a backbone for America’s domestic stability and international strength.
Thus, the importance of this debt lies in its role in ensuring the continued operation of the U.S. government. If major foreign creditors like Japan were to withdraw their support or reduce future purchases of U.S. Treasury securities, the resulting gap in financing could cause serious repercussions. These could include increased borrowing costs (as yields on bonds rise), downward pressure on the dollar, inflation risks, or a general decline in investor confidence.
So how might Japan use this as a strategic tool in negotiations? One potential tactic is signaling a future reduction or pause in its purchases of U.S. Treasury securities. While an outright sale of U.S. bonds could backfire by devaluing Japan’s own holdings, a credible announcement to diversify its reserves or reduce dependence on dollar-denominated assets could generate enough pressure on Washington. Such signaling does not need to be aggressive; even subtle indications in diplomatic communications or shifts in portfolio management by Japan’s Ministry of Finance could cause U.S. policymakers to take notice.
Another option would be to coordinate with other major creditors, like China, the UK, or oil-exporting nations who also hold large amounts of U.S. debt. Although cooperation between such geopolitical rivals is rare, even informal discussions or shared concerns expressed in multilateral forums like the G20 could amplify the message that America’s tariff policy comes at the cost of long-term financial goodwill.
Additionally, Japan could leverage this position diplomatically by requesting reciprocal economic leniency in return for continued bond purchases. For example, Tokyo could condition its ongoing role as a reliable U.S. creditor on reduced tariffs for specific industries, such as automobiles or electronics, or greater access to American agricultural exports. These offers can be framed not as threats, but as part of a “mutually beneficial” trade partnership.
Finally, Japan can use its bond holdings to assert its importance in bilateral economic interdependence. Japan’s willingness to finance U.S. debt reinforces global confidence in the U.S. economy. By highlighting this role, Japan can reframe the narrative: not as a trade “freeloader” accused by Trump, but as a crucial economic ally helping sustain the U.S. economy.
In summary, Japan’s holdings of U.S. Treasury securities are not merely financial assets—they are political leverage. When used carefully, they can be a powerful negotiation card to protect national interests in the face of protectionist U.S. policies.
THE THIRD CALL
Tokyo will continue to pursue an agreement in its negotiations with Washington, as the burden of tariffs is truly being felt across Japan. Japan has taken steps ahead of other nations, and this battle in the negotiation arena serves as an example for many countries before they engage in discussions with the US. The third round between Akazawa and Bessent is set for early June. What strategy has Tokyo prepared for this third negotiation? Will this uncertain situation find clarity soon?
References
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