To understand why Trump loves tariffs, we have to go back to the 1970's. In that period we had big cars with big gas guzzling engines and everybody was happy. The price of gasoline was very low and affordable by all and then the OAPEC oil embargo hit.
**The 1970s oil embargo was a geopolitical move by Arab oil producers—primarily OAPEC—who cut oil exports to the U.S. and other nations in response to their support for Israel during the Yom Kippur War, triggering a global energy crisis.**
Here's a breakdown of the key players and events:
Who imposed the embargo?
- **OAPEC (Organization of Arab Petroleum Exporting Countries)**: This group included major oil producers like Saudi Arabia, Kuwait, and the UAE.
- They acted in coordination with **OPEC (Organization of the Petroleum Exporting Countries)**, which had growing influence over global oil pricing.
What triggered the embargo?
- In **October 1973**, during the **Yom Kippur War**, Egypt and Syria launched a surprise attack on Israel.
- The **U.S. supported Israel** with a $2.2 billion emergency aid package.
- In retaliation, **OAPEC imposed an oil embargo** on the U.S. and other Western nations that backed Israel.
What were the consequences?
- **Oil prices quadrupled**: From $2.90 to $11.65 per barrel within months.
- **Fuel shortages**: Americans faced long lines at gas stations, rationing, and price spikes.
- **Economic turmoil**: The embargo contributed to **stagflation**—a mix of stagnant growth and high inflation—in the U.S. and other Western economies.
- **Energy policy shifts**: Nations began investing in alternative energy, fuel efficiency, and strategic petroleum reserves.
Strategic impact
- The crisis marked a turning point in global energy politics.
- It demonstrated the **power of oil as a geopolitical weapon**, especially for Middle Eastern nations.
- It also accelerated the **decline of U.S. oil dominance**, as domestic production couldn't meet demand.
The 1973 oil embargo helped shape Donald Trump's long-term views on trade and tariffs by highlighting America's vulnerability to foreign economic leverage—especially in energy and manufacturing.**
Here’s how the embargo indirectly influenced Trump’s tariff philosophy:
Strategic Lessons from the Embargo
- **Economic dependence as a threat**: The oil embargo exposed how U.S. reliance on foreign resources could be weaponized geopolitically. This became a foundational concern in Trump’s later rhetoric about trade deficits and industrial decline.
- **Energy as leverage**: The embargo showed that nations like Saudi Arabia could use exports to punish U.S. policy decisions. Trump later echoed this logic in his belief that the U.S. should use tariffs to punish unfair trade practices and reclaim leverage.
Trump's Tariff Views Over Time
- **1980s–1990s**: Trump began publicly criticizing trade imbalances, especially with Japan. He argued that American companies couldn’t compete due to foreign protectionism, citing long delays in exporting U.S. cars to Japan.
- **1999**: On NBC’s *Meet the Press*, Trump said, “They’re ripping us big league,” referring to Japan’s trade barriers.
- **Presidency**: Trump imposed sweeping tariffs on China, the EU, and even allies like Canada and Mexico, framing it as a rebirth of American industry.
Embargo’s Legacy in Trump’s Strategy
- While Trump didn’t publicly comment on the 1973 embargo at the time, its strategic implications—**energy insecurity, trade vulnerability, and foreign leverage**—became recurring themes in his economic nationalism.
- His push for *energy independence*, *domestic manufacturing*, and *reciprocal tariffs* reflects lessons drawn from that era’s crisis.
At that time, Japan significantly increased its investments in the United States after the 1973 oil embargo—especially during the 1980s—fueled by trade surpluses, a strong yen, and strategic ambitions to globalize its industrial base.**
Here’s how that unfolded:
Post-Embargo Economic Context
- **Oil shock aftermath**: Japan, heavily dependent on imported oil, responded to the 1973 crisis with aggressive energy efficiency reforms and export-driven growth.
- **Trade surpluses**: By the late 1970s and 1980s, Japan was running massive trade surpluses with the U.S., especially in automobiles and electronics.
- **Strong yen**: The 1985 Plaza Accord led to a sharp appreciation of the yen, making overseas investments—especially in the U.S.—more attractive for Japanese firms.
Major Waves of Japanese Investment in the U.S.
- **Real estate**: Japanese firms bought iconic properties like:
- *Rockefeller Center* (1989, by Mitsubishi Estate)
- *Pebble Beach Golf Links* (1990, by a Japanese consortium)
- **Automotive manufacturing**: To avoid tariffs and political backlash, Japanese automakers built U.S. factories:
- *Honda* (Ohio, 1982)
- *Toyota* (Kentucky, 1988)
- *Nissan* (Tennessee, 1983)
- **Finance and banking**: Japanese banks and insurance firms expanded into U.S. markets, acquiring stakes in Wall Street firms and real estate portfolios.
Backlash and Retrenchment
- **American anxiety**: The surge in Japanese investment sparked fears of economic domination, leading to books like *Rising Sun* and political pressure for trade restrictions.
- **1990s pullback**: Japan’s asset bubble burst in 1991, triggering a financial crisis and a sharp decline in outbound investment.
Long-Term Legacy
- Japan’s post-embargo investment wave reshaped U.S. manufacturing, especially in the South and Midwest.
- It also laid the groundwork for today’s integrated U.S.–Japan supply chains in autos, electronics, and energy.
Japan’s post-embargo investment surge and trade dominance in the 1970s–1980s deeply influenced Donald Trump’s later trade war strategy, especially his emphasis on tariffs, reciprocity, and industrial sovereignty.
Historical Context That Shaped Trump’s Trade Views
- **Trade imbalance with Japan**: By the 1980s, Japan had a massive trade surplus with the U.S., driven by exports of cars, electronics, and steel. Trump frequently cited this imbalance as evidence of unfair trade practices.
- **Japanese investment in U.S. assets**: High-profile purchases like Rockefeller Center and Pebble Beach stirred public anxiety. Trump echoed these concerns, arguing that America was “being sold off.”
- **Auto industry flashpoint**: Japanese automakers outcompeted Detroit with fuel-efficient cars post-embargo. Trump later used this as a case study in how foreign nations “cheat” through subsidies and closed markets.
How It Shaped Trump’s Trade War Strategy
- **Tariffs as leverage**: Trump’s 2018–2020 trade war with China, and threats against EU and Japan, were rooted in the belief that tariffs could rebalance trade and restore U.S. manufacturing.
- **Reciprocity doctrine**: He often invoked the idea that if a country imposes tariffs or barriers, the U.S. should respond in kind—a principle shaped by decades of perceived one-sided trade with Japan.
- **National security framing**: Just as the oil embargo exposed energy vulnerability, Trump framed trade deficits as national security risks, especially in steel, tech, and pharmaceuticals.
Strategic Continuity
- Trump’s trade war wasn’t just reactive—it was the culmination of lessons from the 1970s oil shock, Japan’s rise, and decades of industrial decline. He saw tariffs not as protectionism, but as strategic correction.
