How Japan is fighting Trump’s protectionism with new trade deals

WHEN one thinks of Japan’s economic achievements, the country’s remarkable reconstruction and boom during the post-World War II period immediately come to mind.

What is less recognised today is the trade liberalisation agenda it has championed during US President Donald Trump’s two terms.

Two recent events demonstrate it: Japan’s summit with India, and talks for a trade deal with South American countries.

On Tuesday (Jun 30), Tokyo kick-started the negotiation process for a trade agreement with Mercosur, the bloc with a population of around 280 million that comprises Brazil, Argentina, Uruguay, Bolivia and Paraguay.

These emerging market powers had a collective gross domestic product of nearly US$3 trillion in 2024; they are also looking to boost trade ties with Asean.

For instance, at the 2025 Mercosur summit in Buenos Aires, Brazilian President Luiz Inacio Lula da Silva urged the bloc to strengthen ties with key Asean nations including Vietnam and Indonesia, and not just with major Asian powers such as Japan and India.

It was not a new impulse: Mercosur has already held multiple ministerial meetings with Asean since 2008.

Tokyo eyes South America

Ties between Japan and the Mercosur bloc have been growing since 2018, when bilateral business organisations began urging the formation of an economic partnership agreement between the two sides. 

Japan already imports significant amounts of goods from Mercosur, such as agricultural produce, energy, metal and minerals resources, and exports chemical products and machinery.

With a potential deal, it is looking to bring in rare earths and clean energy, while boosting exports such as vehicles and car components via a reduction in tariffs.

A big challenge to a Japan-Mercosur deal is the negotiations on agriculture, especially meat.

This echoes the events of the earlier EU-Mercosur trade negotiations, during which opposition from farmer groups in nations such as France nearly derailed the eventual deal.

Prime Minister Sanae Takaichi faces similar concerns from Japanese industries, including beef and chicken farmers. These industries are aware that Mercosur exporters are some of the largest in the world.

She will be looking to protect these key agricultural sectors, while balancing a larger framework of economic trade-offs. 

Deepening ties with India

Japan’s role in pushing for trade liberalisation was also exhibited this week, with Takaichi’s visit to New Delhi for the India-Japan Summit that took place on Thursday. 

The impetus for the event is the keenness of both powers to cultivate closer ties with countries in Asia, amid geopolitical uncertainty.

Takaichi, for instance, sees New Delhi as an “indispensable partner” in her vision for a “free and open” Indo-Pacific.

Bilateral trade is increasing significantly between India and Japan, reaching around US$28 billion in FY2026, growing from about US$16 billion in FY2018.

Another feature of this growing relationship is the rise of Japan’s foreign direct investment in India.

The investment cumulatively amounted to roughly US$43 billion from April 2000 to December 2024, making Japan the fifth-highest investor in New Delhi during this period.

Japan and India this week inked accords in sectors including critical minerals, transport, oil and gas, and pharmaceuticals.

As with Mercosur, India is widely perceived in Japan as an opportunity to diversify production and expand manufacturing capacity.

Both countries also signed a joint declaration on economic security and artificial intelligence cooperation.

Tokyo is aware of the extent to which New Delhi has become an advocate for trade liberalisation as well, especially during the second Trump presidency.

In 2025 and 2026, India has agreed to trade deals with powers including New Zealand, Oman, the EU and UK.

This has coincided with the Trump team’s tariffs on New Delhi.

The situation took a turn for the worse in August 2025, when the president doubled tariffs on Indian goods to 50 per cent – the highest on any Asian economy – because of US concerns about India’s purchase of Russian oil.

Both countries, however, appear to be moving past that chill, and are in the middle of negotiations for their own potential trade deal. 

Charting paths around tariffs

These examples show the degree to which successive Japanese prime ministers have sought to advocate for a liberalised trading system, since Trump was first elected to the White House in 2016 with his protectionist “America First” platform.

In the same year, the UK voted to leave the EU. The twin events shocked Tokyo, as both Washington and London had traditionally been perceived to promote stability in the world order.

In the years since, Japan has sought to use its power as the world’s fourth-largest economy to promote open trade and assist in driving a new wave of global and sustainable growth. 

Ironically, while the Trump tariff agenda has been a headwind to Japan’s drive to boost global trade, it has also fuelled Tokyo’s determination to push it forward with like-minded powers.

One of the biggest trade initiatives that Tokyo has undertaken is with the EU, with a wide range of agreements signed between the two powers, including the Economic Partnership Agreement in 2019, to enhance trade, investment and economic cooperation. 

The Mercosur negotiations and Takaichi’s visit to India underline the extent to which Japan’s move to liberalise trade is gaining momentum.

Despite the many challenges to free trade under the current geoeconomic paradigm, Japan recognises that the opportunities it grants cannot be ignored.

The writer is an associate at LSE IDEAS at the London School of Economics