Trump’s Japan visit shadowed by U.S. trade war with China

TOKYO — Japan’s economy is faltering, South Korea’s currency is plunging and both countries have been caught in the middle of U.S. efforts to isolate Chinese tech firm Huawei.

As President Donald Trump arrives in Japan this weekend for a four-day state visit, the fallout from his trade war with China is reverberating around the region.

There is considerable support in Japan for Mr. Trump’s tough line on China, but that’s mixed with concern about the impact that the trade war and China’s economic slowdown is already having on Japanese exports and factory output.

There are also concerns that Japan will be next in the president’s trade crosshairs, with Mr. Trump impatient for a deal to open its market further to U.S. agriculture and threatening to impose steep tariffs on imported cars on national security grounds.

In Seoul, the won fell sharply this week and has now depreciated by nearly 5% against the dollar in a month, pushed down in large part by the slowdown in China, the fall in China’s currency, the renminbi, and the impact of the trade war.

Both countries also find themselves caught in the middle of the Huawei dispute: Japan effectively banned the company from competing for government contracts in December, but the private sector’s ties to the company are much harder to unravel.

The Sankei newspaper reported this week that 100 Japanese companies supplied Huawei with parts worth $6.6 billion last year while some of the country’s cutting-edge tech firms also collaborate with the Chinese company on development projects.

Shares in Japanese electronic component makers Taiyo Yuden and TDK Corp have fallen more than 20 percent this month.

In a news conference, the chairman of the Keidanren business federation said Japan would have to change its supply chain if the ban on trade with Huawei gets applied to firms here. “So as not to step on the tail of the U.S. tiger, we must take measures,” Hiroaki Nakanishi warned on Monday, according to local media.

In Seoul, the Chosun Ilbo newspaper reported this week that the U.S. government is lobbying South Korea not to use Huawei products.

While the U.S. blacklisting of Huawei has helped push up shares in its competitors in the smartphone market, such as Samsung and LG Electronics, it hit shares in the company’s suppliers and sparked wider concerns in a country that depends on China for nearly a quarter of its exports.