Trump's political show and Takaichi's opportunist move

Editor's note: He Weiwen is a senior fellow with the Center for China and Globalization. The article reflects the author's opinions and not necessarily the views of CGTN. 

Japanese Prime Minister Sanae Takaichi met with US President Donald Trump in the White House on March 19 and reached an arrangement on the second batch of Japanese investment plans in the US, as part of the $550 billion basket in their bilateral trade agreement signed last July.

Apart from the first batch of investment of $36 billion announced last month, they agreed a list of the second batch of energy cooperation, with total investment of $73 billion, including small modular reactor power plants in Tennessee and Alabama with investment of $40 billion by GE Vernova of the US and Hitachi of Japan, and natural gas power plants in Pennsylvania and Texas with investment of $33 billion. Besides, Japan has planned a considerable investment increase in the US oil industry.

It is a big beautiful political pie in the sky for Trump. Firstly, investments of this size normally take years of technology and financial feasibility studies before real investment can actually begin. The studies themselves may outlast his second term. Secondly, Japan does not have the capability to make such huge investment in the US. During the past 70 years, since the 1950s, the cumulative Japanese direct investment in the US was $754.07 billion, or a little over $10 billion per year. But Trump doesn't need to bother about any of this, all he needs is to show this investment commitment to his constituency, especially before the mid-term election.

It is a two-fold comfort of opportunism for Japan, keeping the 15% US tariff level as agreed last July, and reducing the over-dependence on oil supply from the turbulent Middle East. The first comfort is unnecessary. As the "reciprocal tariff" was struck down by the US Supreme Court on February 20, and the White House had no other choice but to trigger 15% Section 122 tariffs worldwide for 150 days, to be followed by Section 301 tariffs, including on Japan. Trump is set to impose tariffs on Japan no matter how obedient the latter is. 

On the other hand, Japan isn't too worried about the tariffs. For the whole year of 2025, Japanese exports to the US fell by 4.1% with the 15% tariff rate, but hit a record worldwide as the other markets more than offset the decline from the US market. 

The second comfort is reasonable but of no imminent use. While over 90% of Japan's oil supply was from the Middle East in 2025, only 3.8% was from the US. Remember, the US is a net oil importer. In 2024, its oil export was 4.2 million barrels per day while imports were 6.4-6.5 million barrels daily.  Hence, it has little extra oil to supply Japan. The announced two mega investment plans have nothing to do with Japan's oil supply, but only power plants for America. The planned investment in the US oil and gas industry will help but take years, and the current turbulence in the Middle East is temporary. Moreover, the location of Japanese oil and gas investments should be on the US Pacific Coast, predominantly Alaska, not Texas, as the shipping line goes through the Gulf of Mexico and Panama Canal. But Alaska was not on the agenda this time.

The prospect of the announced $73 billion investment plans remains uncertain. The first uncertainty lies with the US. The unrepentant White House tariff policy will remain for the rest of Trump's second term, thus raising the manufacturing cost in the US. The erratic behavior of Trump's decision-making casts great business uncertainties over the investment climate in America. It is difficult to work out financial feasibility plans for major investments. Many mega investment plans have been suspended. A report by the Joint Economic Committee of the US Congress last August estimated that US manufacturing investment would decline by 13% annually from 2024 to 2029. In fact, the US manufacturing production index for January 2026 stood at 97.6, 2.4 points lower than in 2017, the base year. The second uncertainty lies with Japan. With oil prices skyrocketing at the moment, Japanese businesses' profit margin has been under extremely heavy strain. A recent report by Daiwa Securities showed that the oil price of $90 per barrel will increase Japan's import costs by 8.1 trillion yen. It will increase to 11.4 trillion yen at $100 per barrel and to 17.8 trillion yen if the oil price goes up to $120 per barrel. Hence, there will be little profit margin for investment.

Japan's total investment commitment of $550 billion is also a big pie in the sky. It will take 40 years to accomplish at the tempo of the last 70 years. Likewise, batch one and batch two investment plans in the US, at $109 billion, will also take several US presidential terms. It is thus all up in the air at the moment. The only certainty is Trump's continuous pressure and Japan's continuous compliant behavior.