The South China Morning Post lately published an article stating “how does it end when the world’s biggest economy takes on the second biggest?” The statement was in context of the economic policies named “Reaganomics” by the 40th US President Ronald Reagan to decrease the American deficit, which mired the Japanese economy and trade.
In 1980s, Japan was emerging as a superpower of the world economy and during the same time period America was facing a trade deficit. Japan, during those times imported automobiles, its parts along with machines, equipment s and electronics to the US, with cars comprising the major part of the exports.
In a report by Washington Post, in 1981, Japan imported about 1.8 million cars in the US whereas the US made cars which were imported to Japan were handful compared to their huge number, which was 4,201.
Since the US economy was in recession back then, the President, Ronald adopted the “Reaganomics” policy to battle the situation, which aimed at deregulation of domestic markets. This in turn was to reduce/ limit the import of the Japanese cars in US.
The policies showed its results the best in 1983, when the trade deficits of America with Japan tabulated to US$36.8 billion, which the last year had accounted to US$15 billion.
Japan’s currency, Yen was strong and thus Japan lowered its interest rates which fueled the asset prices creating a bubble economy which came down with a spectacular crash and eventually led to stalling the economy.
According to Yves Tiberghein, the current situation of China is somewhat similar to Japan during those days.
He further added that Robert Lighthizer, trade representative who served under President Ronald is now advising Trump and they are fighting an old war by placing pressure on it through alliance with Europe, Canada, India and that his only advise to China would be to delay any talk or negotiations with US.
Source: FinancialTimes, Japantimes.co