Trumponomics May Prove to Be 'Severe Disappointment' to Japanese Economy

As President-elect Donald Trump said he would withdraw the United States from the Trans-Pacific Partnership (TPP) in a video released on Monday, the Japanese Prime Minister Shinzo Abe said that "the TPP would be meaningless without the United States," Reuters reported.

President-elect Trump met with Prime Minister Abe at the Trump Tower on Nov. 17. While no American press was allowed to cover the first meeting between Trump and a foreign leader since the election, experts believe that trade and military alliances were high on the talking agenda.

On the campaign trail, Trump repeatedly criticized Japan for not paying enough for the cost of its own military defense while promising to never ratify the TPP -- a centerpiece of President Obama's pivot to Asia and Prime Minister Abe's economic policies. Trump's statements caused anxiety for Japanese legislators who have invested deep efforts in negotiating the 12-nation trade pact.

"I can't imagine that this outcome is anything other than a severe disappointment for Prime Minister Abe," said Lee Branstetter, professor of economics and public policy at Carnegie Mellon University.

Abe said he is "honored" to be the first world leader to meet with Trump and voiced confidence in Trump's leadership after the meeting, which the president-elect's daughter, Ivanka Trump, sat in on. But the squashing of the TPP -- a trade pact that could bolster economic growth in Japan and serve as a counterweight to the rise of China in the region -- will almost certainly cause trade frictions between Japan and the U.S. while making Abe's domestic economic promise of a structural reform seem hollow and difficult to reach.

Japan is the world's third-largest economy, but the island nation lacks raw materials, such as oil and coal for energy. It is also the United States' fourth-largest trading partner and relies heavily on the U.S. for exporting a variety of manufactured goods.

Abe has regularly affirmed that it is important for Japan to have a regional free trade agreement that includes both Japan and the United States.

"He has managed to push many of the conservative elements in his own party to go along with reforms and he always held out as a reward this notion that with the world's largest economy and the world's third largest economy in the same free trade agreement, the TPP would become the international nucleus around which an eventual free trade agreement of the entire Asia Pacific region should eventually coalesce," said Branstetter, who is also a senior fellow at the Peterson Institute for International Economics.

As Trump is expected to carry out his campaign promise of axing the TPP trade deal, China has moved forward to to push its own trade deal with leaders from around the Pacific. Leaders of Pacific Rim nations gathered for a summit meeting of the 21-country Asia-Pacific Economic Cooperation (APEC) in Peru this past weekend.

As an alternative to the TPP, the Beijing-backed Regional Comprehensive Economic Partnership (RCEP) is a 16-nation free trade deal that does not include any countries in the Americas. Australia, Singapore and TPP members Vietnam and Malaysia have shifted their focus to the RCEP after what seems like a certain collapse of the TPP.

"You can already see that China is moving very quickly to fill the vacuum that the U.S. is leaving behind because of its inability to ratify the TPP," said Edward Alden, senior fellow at the Council on Foreign Relations who specializes in U.S. economic competitiveness and trade policy.

"If you look at the APEC summit just this past weekend, it was quite striking to see how outspoken China was in trying to assert leadership on trade arrangements in Asia Pacific not just the RCEP but also reviving the idea of free trade in the area," said Alden.

Although the refusal to ratify TPP, which was a vehicle for reinforcing the economic changes that Prime Minister Abe wanted to make, will certainly hurt the economic interests of Japan and the U.S. in Asia Pacific, experts believe that a renegotiation of the TPP by other leaders in the Republican Party is still possible.

More from Politics

Veteran Affairs Nominee Ronny Jackson Withdraws

Veteran Affairs Nominee Ronny Jackson Withdraws

3 Things Investors Must Know for Monday

3 Things Investors Must Know for Monday

It's Dumb to Think Legalizing Weed Is Still a Political Issue

It's Dumb to Think Legalizing Weed Is Still a Political Issue

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Trump's Oil Tweets Ruining the Stock Market's Rebound?

Trump's Oil Tweets Ruining the Stock Market's Rebound?