Are Trade Agreements Effective Buffers in Trade Wars?

Kaoru Ishiguro
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Kaoru Ishiguro: Graduate School of Economics, Kobe University, Kobe, Japan

Journal of Economic Analysis, 2025, vol. 4, issue 2, 199-217

Abstract: We theoretically examine whether a US-Japan trade agreement would be effective as a buffer against the US-China trade war. There are two ways to mitigate the negative impacts of US protectionism: a “domestic pressure effect to suppress external pressure” and a “free trade agreement (FTA) effect. The former is an effect arising from Japanese protectionist political pressure to suppress the negative impacts of US tariff increases on Japan's political support function. The latter is an effect of the Japan-US free trade agreement. In the absence of a US–Japan trade agreement, both Japan and China’s political support functions decrease when the US raises tariffs. By contrast, when an FTA is agreed between Japan and the US, an increase in US tariffs causes the Chinese political support function to decrease, while the Japanese political support function increases. The US–Japan trade agreement thus plays an effective role as a buffer in mitigating the negative impacts of the US–China trade war on Japan.

Keywords: Trade War; Trade Agreement; Political Support Function; FTA Effect; Domestic Pressure Effect (search for similar items in EconPapers)
Date: 2025
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