Fears over US tariffs
Japan is concerned about the impact US tariffs will have on its automotive industry with President Donald Trump threatening to impose a 25 per cent levy on car imports.
If the American border taxes go ahead, they could deliver a major blow to the Japanese economy.
Tokyo is closely watching any potential impact stemming from higher levies, which Trump has indicated may officially be unveiled as soon as April 2.
Economists estimate the impact would be substantial given that cars make up the largest component of Japan’s exports with the US as their number-one market.
“We have been raising the issue with the US government given the importance of Japan’s automobile industry,” says Yoshimasa Hayashi, Chief Cabinet Secretary.
“Japan will first carefully examine the specific details of the measures that will come out and their impact on Japan, and then respond appropriately.”
Hayashi’s remarks come after Foreign Minister Takeshi Iwaya raised the issue with his counterpart, Marco Rubio, when Tokyo also asked for exclusion from Trump’s reciprocal tariffs. Japan is also seeking exclusion from his fresh tariffs on steel and aluminium.
“Considering that around a third of exports to the US are cars, the impact on the Japanese economy will be significant,” Harumi Taguchi, principal economist at S&P Global Market Intelligence, told the Japan Times.
“If a 25 per cent tariff is imposed on all countries, car prices in the US will rise. If purchasing demand doesn’t keep up, that means demand for Japanese exports will fall.”
Japanese firms may also be hit by 25 per cent tariffs on microchips and pharmaceuticals.
Exports of chips and chip-making devices made up 3.7 per cent of Japan’s total shipments to the US in 2024. Medical items accounted for 1.9 per cent.
There is a good chance Japanese cars will be targeted given Japan is among the top car exporters to the US, according to analysts.
That would be a hit to many workers in Japan. Automotive-related companies including material providers employ 5.58 million people or 8.3 per cent of the country’s workforce, according to the Japan Automobile Manufacturers Association (JAMA).
In 2024, motor-vehicle exports accounted for 17 per cent of all outbound shipments from Japan, with more than one-third of them going to America.
That played a big role in keeping Japan’s trade surplus with the US at a high level, a fact that risks Trump’s ire as he aims to use tariffs to lessen US trade deficits and pressure other nations to build factories in the States.
Japanese companies already make more cars in the US than they export, according to JAMA. In 2023, Japanese marques made 3.3 million cars in America, more than twice the 1.5m they exported there.
