 Anyway, I visited that place. Okay, we're back with Steve Zercher and we're going to talk this morning about politics from afar, from the other side, from the other side of the Pacific Ocean and how it looks, you know, from that side to this side. Steve, welcome back to the show. It's a pleasure. Thanks so much, Jay. I was joking with you. I need a frequent visitor card. A free, yeah. We have to get you. A little a punch one, so I get a cup of coffee after ten. Like in a cafeteria. Punch your card. Thank you so much for having me back. It's a pleasure. So, you know, these days, politics are different than they were and regrettably, I don't think people fully appreciate that if you connect the dots, the dots are all over the map right now and it's very hard to connect the dots with what was going on even five or ten years ago. Right. A lot of the norms we used to take for granted, you know, are gone. And for example, yesterday, yeah, yesterday, Powell, the chairman of the Fed, reduced interest rates at a time when the economy arguably is very strong. That's the opposite direction than it has been in Greenspan time and after Greenspan and before Greenspan. So you wonder where that comes from. But then you remember that it was only two or three weeks ago that Trump was lambasting him for not reducing rates. In fact, at the time, two or three weeks ago, Powell was talking about increasing rates. Right. You know, he was worried about inflation. He was worried about, you know, slowing down the economy because it was going too fast. You know, the standard economic approach to monetary policy. But now we have, and I believe there's a connection between the lambasting and the reduction yesterday. It certainly seems to be that way, yes. You know, when it was supposed to be independent, it's not independent. And various secretaries of various federal departments have been replaced with Trump supporters who do his bidding. Right. And I don't know if you could ask them to be independent. They're not really independent, most of them, as opposed to the Fed. But they are now working for him. Then the Supreme Court, he's trying to pack the work for him. And so we have a government that some people call a sole proprietorship government, where it's just him. This is different. Yeah. Yeah, I can certainly see that. Yeah, it's a little bit reminiscent of Russia. Because when you look at the billionaires that make up that class, it's like Putin's former judo teacher. Oh, you know, there's these connections, he's picked people that he can trust. That's the number one criteria, is that I've known you for a long time and you're going to do what I tell you to do, whether you're qualified or not, that is secondary. But yeah, we, those of us that are living outside of the United States, and did you know how many Americans, just, what would be the guess that you would have on the number of Americans that are living outside of America? A million, total. Nine. Nine million? I know, it surprised me too. I mean, it's hard to estimate this because there are some Americans who don't want to be found that are living outside of America. Yeah, yeah, yeah. That's maybe that's a topic for another show. But that's quite a fair number. And we watch what's going on in the United States, and we have a different perspective because we are living in a foreign country. You know, from previous shows, I'm involved with the American Chamber of Commerce. So I rub elbows with a variety of different business people. Some are on a temporary basis, and some are long-term residents. I have friends that have been in Japan for 30 years. So we look at this type of thing, and we do look at it in a slightly different way because we're embedded in a foreign culture, and we have kind of a long-distance perspective on it. Because you can certainly see the American perspective of those nine million people because, you know, you're active with the Chamber of Commerce in Japan, which means you talk to American business a lot. Sure, yeah, Boeing, Google, cow chemical. These are all major companies that have well-established presence in Japan, are quite successful pharmaceutical companies as well. And it's there are people who are usually expats from America, but not necessarily, maybe sometimes from Europe. And I do get to talk to them quite a bit. And frankly, when they see this kind of thing going on, the general sense is that they're worried, and they're concerned, because these issues, these decisions impact international business. And they're very sensitized to that, obviously. So a very good example is Japan. So Japan is a very important trading partner for the United States, but under the Trump administration, as you're well aware, there's pressure on Japan because there's a trade in balance, a chronic trade in balance between Japan and the United States. That is, Japan is sending more goods to the United States, than the United States is sending to Japan. And Trump fundamentally thinks that's unfair, and that Japan and other countries that are doing that type of thing, like China, is taking advantage of the country. So as a result, various policy decisions are made, and the most critical one in the last few years was Trump's... You may have remembered, when he became president, one of the first things he did was to exit the TPP, the Trans-Pacific Partnership. This was a big blow for us in the Asia-Pacific region, because Japan had already committed to that, and there would have been tariff reductions and intellectual property law regulation that would have changed, and this would have greatly benefited United States firms that are in Japan. The American Chamber of Commerce was very pro-supporting. I have to mention, these are my opinions about the American Chamber of Commerce, I'm a member, but I just want to make that clear. But the general consensus was that that was a very poor decision. Now, a few years later, there's active negotiations going on between the United States and Japan on a direct basis, which is what Trump seems to prefer, a kind of one-on-one thing, right? But basically, it's a catch-up game now. So if we're successful in getting a free trade agreement with Japan, we would, at equal, what we would have had under the TPP to begin with. And right now, we're actually at a disadvantage, because the other TPP countries now have trade reductions with Japan, therefore they can sell their goods in Japan cheaper than America can, because we have to pay the existing tariffs. Yeah, we cut ourselves out. We did, it was very, very short-sighted, and also the EU has created a free trade agreement with Japan that's effective now. So European companies are selling their products, competing against American products in Japan, without having to pay the tariffs. So as expats, we're not living in America, we don't get the daily newsfeed, we're not 100% engaged like other Americans would be or can be, but we watch it very carefully because it does affect business. So that's one thing. The other thing is that as an American, you become a de facto ambassador. I have Japanese people coming up to me all the time. You're American, Steve? Yes, I'm American. Most of the time I admit that I am American. There's something that gets really bad. Canadian. Yeah, well, they do. Sometimes they think I'm Canadian because of the way I talk. Sometimes it's convenient for me to say, oh yeah, you're right. But anyway, most of the time I say, no, I'm an American. And so they'll ask me, what the hell's going on? They want me to explain it. And I have to be honest with you, Jay. Maybe you agree with me, I followed politics in America since I was a teenager. I've always been interested in politics, and it's helped me in my business career as well. But I can't explain what's going on in America right now. This is just beyond anything that I could possibly imagine. Well, I think he intended to be disruptive, and it is disruptive. The problem is disruption is not good for business, and ultimately it's not good for anybody. No, no. So there's a lot of worry. The current negotiations that are going on between the United States and Japan are focusing on agriculture, which is an important industry for America, and also one that's very important to Trump's voting base. So that's, first and foremost, what's being negotiated. And then secondary was autos. And actually, the American auto presence in Japan is minimal. It's always been minimal, and many American auto companies have actually exited from Japan. They really don't care about Japan anymore. They're not selling American cars there. No, and the market's not there. Besides, the Japanese market for cars is going down. Fewer and fewer people are buying cars. This is a worldwide trend, but it's very strong. The big market is China, so they're all investing there. But that was a negotiation topic. I don't know why. This is because Trump, or people within his administration, think it's important. And the industry itself, actually, if you look at it, does not. There are other industries that are doing great, like pharmaceutical industries and insurance industries, very well-established in Japan, very, very successful. And those are not being negotiated currently. And this is at least over here. It's not really the subject of that negotiation. Right, at least not right now. You're teaching entrepreneurship both in Japan and in Hawaii for the summer. Yes. And I wonder how this kind of unpredictable politics, unpredictable government action, affects the mindset of a potential entrepreneur or an entrepreneur. I mean, for example, I believe, and you have to correct me, I believe that the whole notion of entrepreneurs, especially young entrepreneurs, is to believe that tomorrow will be better than today. And if I begin to get the idea that tomorrow is not going to be better than today, it's hard for me to see opportunities in that future. Oh, Jay, that is really an insightful question. There's a couple sides to that. You know, Japan, the bubble burst in the 1990s, early 1990s, 1991, and basically the economy has been flat in trending down for all of those years since, so 30 years now. They call it the lost decade, but it's lost several decades. It's interesting, at the same time, China's dance card is going way up. Yeah, different parts of the development cycle. Japan's go-go years were 60s, 70s. That was when they were on the up curve. And China has been on the up curve now for a while. They're beginning to flatten out a little bit, but still it's five or six years. It's almost like a zero-sum game, you know? I don't know if that would be the case, that you're saying China's win is Japan's loss. Well, it just happens to be. Maybe, yeah. Japan goes up, Japan goes flat. Right. And there may be something to that, but... So the kids that are in my classes right now have grown up in Japan that it's been pretty economically depressing for that whole period of time, and it is affecting their psychology. And they do think that things are going to be worse going forward, and it does depress their initiative and their energy and enthusiasm for entrepreneurship. I see that, you know? So that's a fact of life, at least on the Japanese side of things. The American students, they don't necessarily think that things will be worse. They know that they however have to work harder to achieve what their parents achieved or their grandparents achieved. If you look at the numbers, income in America, the middle class has been flat to trending down since the 1970s, right? The peak was in the 1970s. In Japan, it's the same thing. In the 1990s, it's been flat to trending down. So the real income of middle class families is at best even and actually slightly down. That's the reality from an economic perspective. And the younger people were staying at home. Yeah, many of them are deciding not to engage in corporate life, to take part-time jobs and live at home, so that's a big trend in Japan. Sounds like the US. The second thing is that teaching international business, historically coming out of World War II, the growth of international business year over year has been dramatic, with a few exceptions like the crisis of 2008, 2009. Every year, the amount of international trade, the percentage increase was greater than the aggregate GDPs of the worldwide country. So GDP worldwide was maybe 2%, but international business increase was 4% or 5%, something like that. But now, I can't look my students in the eye and say that that's going to continue forward because we do have this disruption and we have trade fights breaking out. This is reminiscent to the 1930s or the 1940s. I don't think we're that bad, but it's surely sowing signs of that. So it could be that there is a chilling effect going on on an international level, potentially, that will make the future for international business not as positive as it has been coming out of World War II and all those decades since. On a related point, one of the things the Trump administration has done is disrupted relations in general, diplomatic relations. Look what a mess he's made in Europe. You're knocking off NATO, arguing with the chiefs of state in how many countries now. Tearing it up, tearing up relations that have been so close and so productive since World War II. And the same thing in Asia. I mean, the relationship with China, it can't be the same, it isn't the same. It's a relationship, and he's doing China bashing all the time. Yeah, he either says nothing or bashes them, it kind of goes, maybe cycles between those two things. Yeah, so in Japan, Abe may smile at him thinking he's gonna carry favor, but in fact, the relationship cannot be as good because there's tension that Trump has developed, unilaterally developed tension with Japan. So I guess my question is, what is the relationship between the level, the status, the warmth of diplomatic relations and international business with that country? Okay, well, I would say in general, if there is a personal connection between the leaders of the country, that generally is a good thing, and then maybe they engage in more positive dialogue. But if we look specifically at Japan, Abe has been the prime minister for the whole duration of the Trump presidency. He's been in power for a number of years. It predates when Trump, and he was the first foreign leader to visit Trump actually even before he was appointed at the inauguration after the election in between November and January, Abe hopped on that plane and went over there and began to try and build that relationship. He's been investing a great deal in trying to form a positive relationship with Trump. So we'll see how well that turns out based on the free trade agreement negotiations that are ongoing right now. Hopefully that will go smoothly, and it won't erupt into a Twitter fest where Trump says we're gonna put tariffs on the Japanese. How confident are you? If you force me to Jay to make a guess, I would say it's 50-50. If Trump sees that the negotiations are not proceeding in the way that he wants, he wants a deal. He wants a win, right? So, and he's been very patient with Abe. This may be a part of the relationship. There were local elections in July and he didn't want to disrupt things for Abe or make Abe look bad before that. Those elections are now completed and the negotiations are ongoing. So he's already kind of indirectly mentioned that, yeah, we can put tariffs on Japanese autos and that would be devastating. Yeah, oh yeah. That would be devastating to you. It's a huge part of the trade between Japan and America, as you can imagine. Toyota, the number one company in Japan would be dramatically affected. Their profitability would go down quite significantly. So hopefully that won't happen, but it's possible. Let's look at tariffs for a minute, not only automobiles, but really everything, including from China. So if I put a tariff on goods, they are customarily shipping to me, and that means more revenue for the United States. That's one aspect of it, right? Yeah. I tax the importer. Yes. And they write me a check, I put the check in the Treasury. Now, if the fiscal policy of the country is not so swift anyway, for example, the Tax Reform Act of 2017, which cost us trillions in terms of government revenue, if we're throwing the money away, as I think we are in many ways, then that amount of revenue coming from those imports is really not a lot. It's not a substantial part of what we need or what we've lost by virtue of the Tax Reform Act. Right. I don't know the numbers off the top of my head, but it would be a rounding error. It wouldn't be that much. And also, those companies that are importing those goods and paying the tariff, they either are taking a profit hit and maybe laying people off, right, which is a net loss for the government potentially because that income tax income is gone, or they pass the costs on to the consumer and they raise the prices of their product. So, yeah, there is a benefit to the government if you look at it in kind of that narrow perspective, but there are externalities, other effects that are occurring on the economy that probably neutralize whatever that contribution is. Yeah, well, I'm the recipient. I want to buy the Japanese car. I'm pretty determined I want to buy the Japanese car. I have to pay more. So that comes out of my pocket. I'm writing a check for the car, and it's more than I would have had to write. So that's a negative on me. It stresses me on the disposable income. But the other thing is a lot of people don't buy the cars and they feel poor because they don't have the disposable income to pay the extra price. So all of this is negative, negative, negative. It's negative in Japan. It's negative in the United States. It's negative on diplomatic relations, gee whiz. And it doesn't necessarily yield any significant benefit. It's not going to be that we'll sell more American cars here. I don't think that is one of the results of putting a tariff on Japanese cars. Do you remember back in the 1980s? It's deja vu all over again in a bit. We went through that same kind of negotiation with Japan. The Reagan administration told Japan, look, you guys are unfairly competing with the American auto industry, and you need to stop that. And we're threatening to put tariffs. So Japan's response was, don't put tariffs on us, but we'll put in an artificial quota. We promise that we'll only set X amount of cars per year. That was the compromise that was worked out at that time. Two things happened. The price of Japanese cars went up. But just as you're describing, if you wanted to buy a Japanese car at that time, you were paying $1,800 or $2,000 more because of that quota, supply, demand. Excuse me, what did the American auto companies do? They raised their prices, too. That was it. That'll happen again. That will happen again. So there's a little happening in theory. You know, I was just coming out of living in Japan and I was watching this all very closely back then. And that was the real effect of the quotas. And the tariffs would do the same thing. So the price for autos in America will go up, both on the imported side and the domestic side. That's how the firms will respond. The consumer loses. Well, negative. Yeah. Let's go to the point you mentioned earlier, the discussion earlier, that is the disruption. Because the disruption has an effect in terms of world mindset, world leadership. Since the war, since the Marshall Plan, which is over, over, over, there was an article, footnote to that, it was an article in the New York Times about how we have a new Marshall Plan. The new Marshall Plan is that we, that a substantial number of the beneficiaries of the Tax Reform Act of 2017, are offshore corporations. And we are giving them a huge amount of money without any significant benefit on the American side of the equation. This is tantamount to a new Marshall Plan, except that it doesn't go to needy countries. It goes to individual entrepreneurs and corporations that are not so needy. Really quite remit. Anyway, so what you have is. Those are entities that contribute to candidates, right? So they're the ones who are funding the political process. That's true. That's why. Oh, yeah. That's why. Right. Really, the Citizens United was not a surprise. Right. Do you have thoughts about that? I'm well, my own personal opinion on that is it's a disaster and it's anti-democratic, basically. So that's one of the things. I asked some of my friends before I came on the show what they thought about their perspective. And these are long-term residents of Japan lawyer, teachers, and others. And one of the concerns they have, and I don't know how prevalent this is within the United States, is that democracy is really under threat right now. For these reasons, Citizens United and also just the way America is being run under this current administration. So we, as a group of people living outside of America, are a little concerned about where this is leading to and that democracy is under pressure, under threat. But we feel that. We look at that. And I don't know if you feel that way, Jay, or maybe some of your friends are. I do feel that way. Oh, you do. So that's something that we do share. That was one impression. And then the other thing, too, that you've already mentioned a bit is that it's very clear to us living outside of America that our standing, our influence, is waning. That's what I wanted to get at. So he's making all these disruptive moves. He's knocking off relationships. He is not really giving to the world. He is abusing and separating from the world. He's creating divisiveness everywhere, outside the country, inside the country. It's almost like he works for Putin. A lot of people have said that. So the question really is, how does that affect the way people see the United States in general and as a leader of the, quote, free world? Not sure we are treated that way anymore. And if we are not treated that way anymore, how does that affect business? Yeah. When Trump was elected, as a representative of the ACCJ, I go to many Japanese business organizations meetings. There's kind of a season for these things around the New Years. Every one of them has Oshogatsu, New Year's party or meeting. And after Trump was elected for the first time ever, and I was with the Council of People, Embassy People at these meetings. The politicians, the local politicians were beginning to make fun of America. We had never seen that before. Never, in all the years that I've been in the United States. Because Japan has historically had a very respectful relationship, the United States, the economic and political. The best partner in Asia, for sure. Exactly. So all of a sudden, we began to see that. And actually, even though I could kind of understand why they were saying that, as an American, I felt a little bit insulted. Because even though I do live abroad and I've been gone for a long time, I still fundamentally am an American. I'm very proud of being an American. There's no question about that. And then subsequent to that, I think the perception is that, yeah, America is kind of a downhill slide. That this erratic leadership and inconsistent foreign policy and economic policy is causing concern. And there's worries that things are not going to go well. We haven't talked yet about immigration. Let's talk about immigration. Let's talk about what seems to be a consistent underlying pattern of racism and nationalism that excludes, well, people who are not Caucasian. I mean, it keeps popping up. And lately, he's been essentially admitting that. That's a fundamental point of his administration. So the Japanese, for example, they're not Caucasian. And they don't fall in his chosen people. And of course, the Japanese can see what's happening at our border. They can see what happens to the South American children being caged without any record of who they belong to, separated from their families. There's outrageous things that one would never have expected that would happen in this country. And now people in Japan and elsewhere in the world look and see on a moral level, and I guess on a practical level too, that we are abusing immigrants and people of color in every way we possibly can. How do they feel about that? How does that affect our relationship and our business relationships? So I've been in Hawaii the last month or so. So I haven't really seen what the reaction is in Japan. That's a good question. I think, though, that until Trump actually begins to actively attack Asian politicians, and that may be next, he may pick some. If there's an Asian politician, a congressman or woman, who becomes harshly critical of Trump, then he probably won't hesitate to pull the trigger, the Twitter trigger, and go after them. That may happen. When that does happen, then maybe this will become more real. I think Japanese people are aware of what's going on. They generally know what's going on in American domestic politics and follow the story. Sometimes my wife will talk to me about things that I'm surprised that she knows about, that she gets through my wife's Japanese news sources. But they may make a distinction between brown people, whom generally Trump is going after, Mexican people or black people and Asian people. As far as I know, Jay, maybe you can correct me if I'm wrong, he really hasn't gone after that segment, that demographic segment yet within the American political system. It's only a parallel. And I suspect what you're saying is that people in Japan, as in other places in the world, they see this as happening. They think it's his brand of racism, it's his brand of xenophobia, and they can afford to ignore it until it comes for them. I think that's probably, maybe not consciously, but unconsciously, that may be the response right now. But I can tell you that certainly there's a chilling effect going on within the education system, which is what I'm closest to. Students are becoming less likely, and these are Japanese students as well, to choose America, to study. Harsh, there's two reasons. Harsh is partially the first one. Well, actually, the first one may be just the gun violence that exists in America, as you know. I mean, there's periodic shootings on campuses and every week. Yeah, so that has a chilling effect, because parents worry about their kids. Even though the odds of something terrible happening are low, you read about that, and you go, wow. And there have been Japanese students that have been shot. There's some famous stories. Of course, when that happens, that's huge news in Japan. So that's part of the reason why there's a chilling effect. And then also, just the general tenor of American politics currently, is it's not welcoming. So actually, I was just reading, before you came here this morning, through the Chronicle of Higher Education, it's a very high quality information source for educators, that Chinese visas are now being turned down. So American university systems are dependent on foreign students. It's one of their major revenue sources, and of the students that are visiting America, the biggest chunk are Chinese. And now the Trump administration is turning those visas down, and this is like a knife to the heart of the American education system. This is not good. Just a nice to the heart of a fundamental point in China is that if you want to get out and do business, you need to send your students overseas. They don't do it for love, and they don't do it for espionage. They do it because they believe that'll make their population, their business population, their academic population, that much more sophisticated. So it's commonplace to go for a master's degree, either in Yan. And there are other options aside the U.S. where they can go. Yeah. So to learn English, to acculturate into a foreign country. Back in the old days, before China took off, then the career path would be work for an American company. And now the Chinese economy is developed to such a high level. So get educated here, maybe work a little bit, and then go back to China and work for a Chinese company. So that's the path now. Yeah, we should be doing the same thing, but we haven't, that's another issue. One more point I wanted to cover with you because we're out of time is the whole thing about free speech, you know? I mentioned before that the United States has been a beacon of civil rights, human rights, well, civil rights in a theoretical sense. Human rights maybe in a larger sense. And among them, the First Amendment, the separation of church and state and freedom of the press. And freedom of the press in the United States has been a beacon all by itself to the world. It has shown the world where freedom of the press wasn't necessarily the case. That it's better to have freedom of the press. Places in Asia, I'm sure Japan is one of them, have warmed to this idea, and over the years, there's just total freedom of the press in Japan, and for that matter, Hong Kong, I'm not so sure about China. But what I get out of this is the US is, obviously, you spoke about the failure of democracy here, the decline of democracy. We are declining on freedom of the press. We're also declining on the establishment clause about religion. But I wonder how this affects a place which has copied us, which has emulated our freedom in that regard in the past. Yeah, the Japanese Constitution was written by MacArthur and his people. And freedom of the press is the fundamental element of it. In reality, though, Jay, there is press suppression that goes on. Japan's been a one-party state. LDP has been in power since World War II. And even though they don't do it directly, I mean, they're not suing or calling them the enemy of the people, which is something that you, unfortunately, have heard recently under the current administration. The more liberal-leaning press, like the Asahi group, sometimes comes under very, very harsh pressure to try and rein in the reporting that was making the government look bad. So I think that is in effect there. So there's not a direct censorship. There's kind of indirect censorship that goes on in the NHK. Maybe some of your viewers are familiar with NHK. It's on television here. They have wonderful programs. But over the last four or five years under the Abe administration, their political stance has moved very, very distinctly to the right. And the people who are controlling that corporation are Abe appointees. So I think to answer your question, probably Abe or other leaders of governments in Asia and elsewhere, look at what Trump is doing and say, well, if he's doing that, then so can I. Or it gives them cover. Yeah. So I think that definitely is a factor. Yeah, Steve, it's wonderful to talk to you about it. Well, thank you so much. Again, I always enjoy this. I really appreciate it. It's a perspective we need to understand. Steve Zercher. Yeah, it's a pleasure. Thank you so much. Bye-bye. Thank you. Thanks, everyone.