The Future Course of German and Japanese Capitalism in a Multipolar World under Trump 2.0

In his compelling analysis, Professor Ibrahim Ozturk explores how “Trumpism 2.0” and a multipolar world order are challenging the foundations of German and Japanese capitalism. As the US shifts toward protectionism, economic nationalism, and corporate oligarchy, both countries—once revitalized by American support after WWII—must now reassess their strategic and economic futures. Ozturk examines how trade wars, supply chain disruptions, and declining US cooperation threaten their export-driven models. From demographic decline to digital transformation, Germany and Japan face urgent structural reforms. This timely commentary not only maps the common and unique risks confronting these two economic giants but also outlines actionable strategies to maintain resilience in a fragmented world. 

By Ibrahim Ozturk 

I argued in my commentary that “Trumpism 2.0” marks a fundamental shift in global capitalism, blending nationalist protectionism, corporate oligarchy, and digital feudalism. The United States (U.S.) is transitioning from ‘neutral’ state capitalism to a model where government policies explicitly serve dominant private entities, eroding economic democracy and consolidating monopolistic power. This transformation deepens domestic inequality while driving international economic fragmentation, trade wars, and strategic decoupling. Meanwhile, the Global South is asserting greater autonomy, challenging Western dominance, and reshaping economic alliances. If these trends persist, escalating geopolitical tensions, supply chain disruptions, and financial instability may define the coming decades. Yet, this period of turbulence—reminiscent of the 1930s—also presents an opportunity for systemic change, though it raises the risk of large-scale global conflict.

This process will also challenge German and Japanese capitalism, distinct derivatives of America’s preferences after World War II and shaped by the demands and constraints of the Cold War context and the mentalities and cultural dynamics of German and Japanese societies. 

Considering new challenges, this commentary reveals a potential roadmap for German and Japanese capitalism. First, the article compares the characteristics of American and Japanese capitalism. Next, it examines the role of the US in revitalizing the struggling German and Japanese economies. The third section addresses the common and unique issues these countries face, along with the effects of the Trump Administration and a US-less world. The fourth section summarizes the possible responses from Germany and Japan.

Three Models of Capitalism under Flux

To compare Japanese, German, and American capitalism, one must examine their economic structures, government-business relations, corporate governance, labor markets, and cultural influences. As Robert Gilpin puts it, American, German, and Japanese capitalism embody distinct models shaped by historical, cultural, and institutional contexts. American capitalism, a Liberal Market Economy (LME), is highly market-driven and individualistic, characterized by minimal government intervention, shareholder-focused businesses, a flexible labor market, and a strong entrepreneurial culture, fostering innovation and financial dominance but also leading to corporate volatility, weaker social safety nets, and economic instability. 

On the other hand, German capitalism, a Coordinated Market Economy (CME), follows a stakeholder-oriented model with strong labor unions, long-term investment strategies, and an export-driven manufacturing sector, ensuring stability, high-quality production, and social welfare, though facing challenges in labor market rigidity, trade dependency, and adapting to disruptive technologies. 

Similarly, Japanese capitalism, a form of Developmental State Capitalism, is rooted in state-business coordination, the keiretsu corporate system, lifetime employment traditions, and a focus on incremental innovation, enabling industrial stability and technological leadership but struggling with an aging population, stagnant wages, and slow digital transformation.

Each capitalist model has distinct strengths and weaknesses: US capitalism is highly dynamic, fostering innovation and financial dominance but prone to volatility and inequality; German capitalism offers stability and social equity but lacks flexibility; and Japanese capitalism prioritizes long-term stability and industrial coordination but adapts slowly to change. While each system has trade-offs, nations often adjust their models over time. On the other hand, in the modern era, American influence played a significant role in shaping the German and Japanese models, and it is exerting pressure for change in another direction now.

America’s Revival of Japan and Germany

Germany’s assertive expansionism in Europe and Japan’s in Asia, driven by an obsession with becoming a leading global powerhouse during the first half of the 20^th century, led both countries into the catastrophe of World War II. However, despite having inflicted severe defeats on them and initially signing humiliating surrender agreements that deeply restricted their rights to self-governance, independence, and sovereignty, the US, which emerged as the new hegemonic power—replacing Britain—did not choose to "punish" these nations after the war, due to the new global power contestations. Throughout the Cold War, the US considered the spread of communism the greatest threat to its hegemony and democracy, capitalism, and the free market economy. In response, it took steps to rebuild Europe, particularly Germany, and in Asia, Japan. By doing so, the US provided both nations a lifeline after the most devastating destruction in their histories, fundamentally changing their fate in favor of democracy and economic development.

Both countries were rebuilt through American economic aid, market access, and security guarantees, which allowed them to focus on economic growth rather than military spending. In terms of Japan, the US contributed to its economic development and industrialization via its post-war economic reconstruction through Marshall Aids, the war boom that came with the Korean War, and access to the US market with a Most Favored Nation status (MFN).

Starting with Japan, first under US occupation, led by General Douglas MacArthur’s SCAP (Supreme Commander for the Allied Powers), Japan’s economic reconstruction period (1945–1952) involved

Structural reforms like the demilitarization and restructuring of its economy.

Land reforms that redistributed land from landlords to tenant farmers improved agricultural productivity.

The dissolution of Zaibatsu, large conglomerates that supported Japanese atrocities in Asia, aimed to dismantle industrial monopolies; however, later, keiretsu networks emerged, but this time, contributed to the development of a civilian and trade-oriented economy through the formerly well-established discipline and perseverance.

Labor reforms promoted unionization and strengthened worker rights. However, that measure was reversed after Japan’s alliance with the US against the expansion of communism in Asia.

Implementing the Dodge Plan 1949 aimed at fiscal austerity to manage inflation and stabilize Japan’s currency. As a result, the plan established a fixed exchange rate (1 USD = 360 yen), making Japanese exports competitive.  

Second, the measures’ first significant and advantageous outcome emerged during the Korean War Boom (1950–1953), when the US war effort in Korea turned Japan into a vital supply base, leading to rapid industrial growth. In this context, heavy industries (steel, machinery, textiles) thrived as Japan became a supplier of military goods. Moreover, US military protection under the US-Japan Security Treaty (1951) freed Japan from defense spending, allowing it to focus entirely on economic growth.  

Third, the expansion of the Japanese production economy, characterized by a strong export focus, extended beyond the market established by the Allied forces in Korea. Notably, the MFN status allowed Japan access to the US market and supported its economic integration from the 1950s to the 1970s. In addition to full access to American markets, which enabled companies like Toyota, Sony, and Honda to grow globally, technology transfers and guidance from US firms helped Japan modernize its industries. Substantial US investment in Japanese sectors facilitated technological upgrades, and by the 1980s, Japan had become the world’s second-largest economy, challenging even the US in some areas. With government-industry coordination (MITI—Ministry of International Trade and Industry), Japan’s Economic Miracle (1955–1980s), focused on export-led growth and high-quality manufacturing, emerged prominently. 

In the case of Germany, first, American support for the war-thorned German economy included the Marshall Plan(1948–1952), which envisaged the disbursement of $1.4 billion (part of Europe’s $13 billion US aid package). The fund helped rebuild factories, roads, and energy infrastructure destroyed during the war. Like Japan, currency reform (1948) helped introduce the Deutsche Mark, replacing the unstable Reichsmark and stabilizing inflation.  

Second, West Germany’s membership in NATO (1955) allowed a US military presence and security umbrella, which meant Germany could spend less on defense and more on industry. The Cold War made West Germany a key US ally, ensuring sustained economic and military aid.  

The third significant contribution stemmed from Germany’s access to the U.S. market. The US encouraged trade with Europe (EEC in 1957, which later became the EU), integrating West Germany into global markets. Moreover, US investments in the German industry strengthened the growth of advanced manufacturing (e.g., Siemens, Volkswagen, BASF).  

Consequently, technological advancements and innovations enabled Germany to become an export powerhouse in manufacturing. They fueled GDP growth at 8–10% annually during the 1950s, culminating in the so-called West German Economic Miracle (Wirtschaftswunder, 1950s–1970s). This era, along with Ludwig Erhard’s free-market policies and US support, led to rising wages and improved living standards. By the 1970s, Germany had emerged as the world’s third-largest economy, boasting robust automobile, machinery, and chemical sectors.

The US Impact on specific industries in Japan and Germany

Automobile industry: After World War II, the US played a crucial role in rebuilding and shaping the economies of Japan and West Germany, particularly in industries like automobiles, technology, and finance. This support was driven by Cold War strategy—strengthening allies against communism—and economic pragmatism, ensuring both nations became stable markets and production hubs.  

Technology transfers, quality management, and access to the U.S. market were the three most critical contributions to the automotive industry. Among other factors, introducing modern management and production techniques, such as W. Edwards Deming’s quality control principles, formed the backbone of the Japanese Total Quality Management (TQM) revolution, which enabled Japanese automakers to dominate the global market. Additionally, the US opened its market to Japanese cars, allowing brands like Toyota and Honda to thrive with fuel-efficient, high-quality vehicles, particularly after the 1973 Oil Crisis when American consumers looked for alternatives to fuel-hungry domestic cars. However, Japan’s MFN status almost culminated with the Plaza Accord (1985), when the US pressured Japan to revalue the Yen, making exports more expensive and prompting Japan to establish factories in the US, which led to direct investment and job creation.  

Like Japan, the precise contribution of the US to the automobile industry in Germany originated from the partnership between Daimler-Benz and Ford. Also, American capital and expertise played a pivotal role in revitalizing companies such as Volkswagen, which had fallen into disrepair after WWII. Through transatlantic trade and global expansion, the US emerged as a crucial export destination, allowing German luxury brands like BMW and Mercedes to dominate the premium segment.  

Technology and Electronics: Japan’s electronics giants, such as Sony, Panasonic, and Toshiba, benefited from US military R&D spillovers and Cold War-era procurement. However, the US-Japan trade war in the 1980s later limited their dominance in the semiconductor market. Meanwhile, Germany’s industrial powerhouses, including Siemens and Bosch, regained global market access through US investment, with NATO and defense contracts fueling demand for their precision engineering.

Financial and Banking Sectors: The US tolerated Japan’s keiretsu system, where conglomerates like Mitsubishi and Sumitomo were linked to banks, enabling rapid industrialization. However, in the 1980s, it encouraged Japan to deregulate its banking sector, contributing to the asset bubble that burst in the 1990s. Similarly, the U.S. supported Germany’s financial reintegration by promoting Deutsche Bank’s global expansion and stabilizing the Deutsche Mark through the Bretton Woods system, aiding Germany’s integration into the international economy.

In conclusion, US economic support was crucial in transforming Japan and Germany into global industrial powerhouses, with Japan benefiting from technology transfers and market access. At the same time, Germany rebuilt its engineering and manufacturing sectors through US aid. Without US assistance, market access, and security guarantees, neither nation could have industrialized as rapidly post-WWII, highlighting a US-driven framework that still influences their economies today.

However, to understand how Trump and the emerging multipolar world—discussed in the next section—might shape the future of German and Japanese capitalism, it is crucial to recognize that the US approach to these economies reflects both global dynamics and America’s domestic interests. Since the 1980s, especially after the collapse of communism, the US has influenced the economic trajectory of these nations, which it began to see as "systemic rivals," through trade disputes, financial pressures, and currency interventions. In the evolving, leaderless global order—often referred to as the "New Cold War Era"—changes in US strategy seem inevitable, bringing significant consequences for both Germany and Japan.

Germany and Japan under the Trump Administration and US-less World

Some of the problems and challenges facing the German and Japanese economies will be structural, some conjunctural, and some, it seems, will be Trump-related. Thus, the German and Japanese economies face a mix of common and unique challenges. Both countries struggle with similar demographic issues, such as aging populations and declining birth rates, leading to labor shortages, pressure on social welfare systems, and increasing healthcare costs, all of which impede long-term economic growth. Additionally, both nations face obstacles in modernizing their economies through digital innovation, with Germany contending with outdated infrastructure and excessive bureaucracy. At the same time, Japan wrestles with traditional work cultures and the slow adoption of AI and digital technologies. Furthermore, both economies heavily depend on exports, making them vulnerable to global slowdowns and geopolitical risks—Germany’s reliance on China and Japan’s exposure to US-China tensions exacerbate these vulnerabilities.

However, each country faces its distinct challenges. Germany’s energy crisis—from the shift away from Russian energy and delays in renewable infrastructure—has increased costs, impacting its industrial competitiveness. The transition to electric vehicles (EVs) and high manufacturing expenses have weakened Germany’s position amid fierce competition from China and the US. Meanwhile, bureaucracy hampers innovation, particularly in the public sector and among SMEs. In contrast, Japan is dealing with stagnant wages and deflation, which restrict consumer spending and hinder economic growth. The country also faces high debt levels, with government debt exceeding 250% of GDP, raising concerns about long-term fiscal sustainability. Additionally, Japan’s dependence on energy imports and raw materials and supply chain vulnerabilities, especially semiconductor disruptions, put its key industries at risk.

With Trump ascending to the presidency for a second time, Germany and Japan are confronted with significant economic and strategic challenges. Their concerns about the Trump administration stem from worries regarding the effects of his protectionist trade policies, geopolitical unpredictability, economic nationalism, and the sidelining of the rule of law in favor of contingency management. Additionally, there is a tendency to exert power and force while ignoring international norms and values.

Trade wars and tariffs caused key economic fears for Germany and Japan. To remind you, Trump previously imposed 25% tariffs on European and Japanese steel and aluminum under national security grounds (Section 232). He has also threatened new tariffs on European and Japanese cars, which could severely hurt Germany’s auto industry (VW, BMW, Mercedes) and Japan’s car exports (Toyota, Honda, Nissan). He has also criticized US trade deficits with both countries, which could lead to harsher trade barriers.  

The second fear concerns the disruption of global supply chains. Trump’s "America First" policy prioritizes reshoring manufacturing to the US, which could pressure Japanese and German companies to shift production away from their home countries. If Trump weakens or removes from the World Trade Organization (WTO), global trade could become more chaotic and unpredictable.  

Security concerns are the most common fear in Japan and Germany. Trump has threatened to withdraw the US from NATO, forcing Germany to increase military spending significantly. If US security guarantees weaken, Germany may have to allocate more funds for defense rather than industrial investment. Russia could exploit this security gap, leading to economic instability in Europe. Similarly, Trump has repeatedly criticized Japan for not paying enough for US military protection. If the US reduces its military presence, Japan may have to massively boost defense spending, affecting government budgets and economic growth. 

Germany and Japan’s Possible Responses

The problems of German and Japanese capitalism go beyond Trump’s negative impact and the rise of the new Cold War era under multipolarity. Germany faces significant structural challenges, including energy dependence, industrial competitiveness, demographic decline, bureaucratic inefficiencies, and gaps in digitalization. Addressing these issues requires comprehensive reforms, strategic investments, and policy changesto enhance long-term economic resilience and competitiveness.

The expansion of renewable energy should be accelerated while diversifying LNG and nuclear sources, and industries should support green hydrogen to strengthen energy security and industrial competitiveness.

Strengthening manufacturing demands increased R&D in AI and semiconductors, support for SMEs and startups, and investment in EV and battery production.

Addressing labor shortages necessitates streamlined immigration policies, expanded childcare and reskilling programs, and greater adoption of automation.

Reducing bureaucracy through digital public services, tax reforms, and faster permit approvals will improve business efficiency.

Finally, accelerating digital transformation with nationwide 5G, AI-driven innovation, and enhanced tech education will elevate Germany’s competitiveness in the global economy.

On the other hand, Japan also faces deep-rooted economic challenges, including an aging population, stagnant wages, deflation, high public debt, slow digital transformation, and supply chain vulnerabilities. Addressing these issues requires structural reforms, policy shifts, and innovation-driven strategies to ensure long-term economic resilience.

Japan must implement bold reforms to address its structural challenges and ensure long-term economic resilience.

To combat labor shortages and demographic decline, it should expand childcare support, streamline immigration policies, and invest in automation and AI.

Breaking stagnant wages and deflation requires tax incentives for wage growth, stimulating domestic consumption, and maintaining moderate inflation.

Reducing public debt calls for gradual fiscal consolidation, efficient public spending, and pension reforms.

Accelerating digital transformation through 5G expansion, AI adoption, and corporate modernization will enhance productivity and innovation.

Lastly, strengthening supply chains by diversifying energy sources, investing in domestic semiconductor production, and securing trade partnerships will improve economic stability. By tackling these issues, Japan can sustain its global competitiveness and long-term growth.

More recently, Trump has introduced new dimensions to these challenges in both countries. His return has resulted in increased tariffs, trade barriers, and geopolitical instability, putting pressure on the export-driven economies of Germany and Japan. Both nations must diversify trade, invest in strategic industries, and strengthen their regional alliances to reduce economic risks. The following measures and policy recommendations are plausible and foreseeable solutionsregarding conjunctural progress under the Trump administration and multipolarity. 

Strengthen Trade Ties with Other Regions.

Germany could deepen EU-China trade or increase ties with India and ASEAN.  

Japan could increase trade with Southeast Asia, Australia, and the EU. 

Accelerate Industrial and Technological Independence

Reduce reliance on US markets by boosting domestic demand and innovation.  

Invest in digital industries, AI, and green tech to diversify economies.  

Strategic Military and Security Adjustments

Germany may increase defense budgets and push for greater EU military cooperation.  

Japan may develop stronger regional security partnerships (e.g., with Australia, India, and South Korea).  

Conclusion

The resurgence of "Trumpism 2.0" and the evolving multipolar world are reshaping global capitalism, posing significant challenges for German and Japanese economic models. Historically shaped by American influence, both nations now face increasing pressure from protectionist policies, geopolitical uncertainty, and domestic structural issues. While Germany grapples with energy dependence, digital transformation, and industrial competitiveness, Japan contends with demographic decline, deflation, and technological adaptation. 

To navigate these shifts, both countries must pursue strategic diversification to navigate these shifts—strengthening trade alliances beyond the US, investing in innovation and industrial resilience, and adapting security strategies to new geopolitical realities. 

The coming years will test their ability to maintain economic stability and global influence amid rising fragmentation. However, this era of disruption also presents opportunities for transformation, pushing Germany and Japan toward greater economic autonomy and leadership in a rapidly changing world.