For decades, the United States and Japan have built one of the world’s most successful and stable trade partnerships — a relationship Wendy Cutler says remains vital as the global economy grows uncertain.
Cutler, senior vice president at the Asia Society Policy Institute and a former U.S. trade negotiator who spent nearly 30 years working on U.S./Japan issues, discussed the future of this partnership during a Nov. 19 event sponsored by the Clayton Yeutter Institute of International Trade and Finance.
“We're not going to go back to where we were on trade,” Cutler said. “I think we're living in a tariff world for the indefinite future.”
Cutler’s talk focused on the theme “What's Next for U.S.-Japan Trade?” Jill O'Donnell, the Haggart-Work Director of the Yeutter Institute, led the discussion with Cutler.
Mike Boyle, president of Kawasaki Motors Manufacturing Corp., introduced Cutler after briefing the audience about his company and the extensive market connections linking Japan and the United States. Japan is the No. 1 foreign investor in the U.S. and in 40 states including Nebraska, said Boyle, a Husker alum with a bachelor’s degree in mechanical engineering. Japan’s total investment in the U.S. tops $819 billion and employs 968,000 people.
Japan is the No. 1 foreign buyer of Nebraska pork and the No. 2 importer of Nebraska beef and corn. In 2024, Nebraska’s exports to Japan totaled almost $700 million. More than 120 Nebraska companies are actively involved in trade with Japan.
The Kawasaki plant in Lincoln, which marked its 40th anniversary last year, has 3,000 employees making off-road vehicles, railcars, subway cars and large parts for Boeing aircraft. The 2.3 million-square-foot facility is the largest manufacturing plant in Nebraska.
Kawasaki’s Lincoln operations partner with more than 1,200 U.S. suppliers nationwide employing 22,000 people, and in 2024 the plant’s purchases of U.S. parts and services totaled $893 million.
The Lincoln plant also used $517 million in imported parts and materials, and the Trump administration’s stepped-up tariffs this year required the company to pay an additional $170 million in import taxes. The tariff costs have “really been disruptive to our business,” Boyle said.
Cutler said she regularly hears from U.S. companies that are holding off from making investment decisions due to the uncertainties generated by ever-shifting tariff levels. Ironically, American automakers haven’t achieved a significant cost advantage against Japanese competitors, she said, because the Trump administration’s 50% tariffs on imported steel and aluminum have caused spikes in input costs for U.S. automakers and other domestic manufacturers.
Through extensive trade negotiations with the United States this year, Japan achieved a reduction to 15% in the U.S. tariff on Japanese auto exports, down from 25%. Japan’s agricultural constituency is a powerful political interest that will always push for trade protection, Cutler said, but U.S. agricultural producers will benefit from Japan’s new pledge to buy an extra $8 billion each year of U.S. exports including corn, soybeans, bioethanol and sustainable aviation fuel.
Japan also agreed to invest an additional $550 billion in a variety of projects in the United States. The arrangement is unusual and gives the United States great leverage in decision-making, but Japan’s commitment seems genuine, said Cutler, who served as the assistant U.S. trade representative for Japan, South Korea and the Asia-Pacific area.
If the Supreme Court rules that the administration acted beyond its constitutional powers this year in abruptly imposing tariffs under the 1977 International Economic Emergency Act, the executive branch will have other tariff-imposing tools, but they will be far more slow-moving and procedurally complicated compared to what the world has seen this year, Cutler said.
Just as the U.S. recently lowered tariffs on food items such as coffee and bananas, the administration will likely face pressure to provide additional exclusions on some goods, especially as midterm elections approach in 2026, she said.
The United States’ aggressive and ever-changing approaches on tariffs have given countries “a wake-up call” about U.S. unreliability as a trading partner, Cutler said, and many are pursuing bilaterial and regional trade agreements intended to shift their trade away from the United States.
“This could end up really biting the United States because these agreements will have commitments and market opening, but that will be reserved for the participants to the agreements,” she said. Over the long term, “we could really end up losing out if we don't find a way to integrate our economy more with other countries around the world.”
