Can a $10 trillion investment withstand Trump's 25% tariffs? Japan's bold gamble and risks

The first wave of economic policies after Trump took office shocked the market. After announcing a 25% tariff on all imported steel and aluminum products from the United States, the yen exchange rate came under pressure. In response to this wave of trade protectionism, Japan adopted a bold countermeasure—pledging to increase its direct investment balance in the U.S. to $1 trillion.

On February 7th, Japanese Prime Minister Shinzō Abe held his first formal meeting with Trump. Abe stated that Japanese companies are optimistic about the U.S. market prospects and will significantly increase their investment efforts. SoftBank Group and other Japanese firms are planning to invest hundreds of billions of dollars in the U.S. for artificial intelligence infrastructure development, which is expected to further boost Japan’s investment scale in the U.S. Trump responded positively, acknowledging Japan’s contribution to creating jobs in the U.S.

By 2023, Japan’s direct investment balance in the U.S. had reached $800 billion, maintaining the top position globally for five consecutive years. If this investment plan is implemented, Japan will become the largest source of foreign investment in the U.S. During the meeting, Abe also announced that Japan would expand its procurement of U.S. liquefied natural gas (LNG) and jointly develop natural gas resources in Alaska.

However, good news was soon overshadowed by bad news. On the same day, Trump announced a 25% tariff on imported steel and aluminum products, without excluding any countries. Furthermore, he plans to implement a “reciprocal tariff” policy on the 11th or 12th, meaning the U.S. will impose tariffs equivalent to those levied by trade partners on U.S. goods.

Experts hold differing opinions on whether Japan can escape this wave of tariff impacts. Professor Kazuhiko Maejima from Sophia University’s Faculty of Global Studies believes that although the summit was filled with friendly words, the real test has just begun. Whether measures such as increasing energy procurement and expanding manufacturing investment can truly change Trump’s tariff policies remains to be seen.

Senior researcher Koji Watanabe from the Sasagawa Peace Foundation offers a more cautious view, believing that the $1 trillion investment pledge is merely a short-term appeasement and cannot fundamentally prevent U.S. tariff measures. Analyses generally point to the same conclusion: Japan must continue to demonstrate its economic value to the U.S. in order to reduce the risk of being subjected to tariffs.