Companies

Trump Tariffs Set to Deal Heavy Blow to Japanese Automakers, Drag Down Japanese Economy

AP
Signs for import car brands are seen at an auto mall in the City of Industry, Calif., on Thursday.

The Yomiuri Shimbun

17:15 JST, March 28, 2025

The United States’ move to impose added tariffs on cars will likely be a major blow to Japanese automakers, which export many vehicles to the States from Japan, Mexico and Canada. As Japan’s auto industry has a broad range of companies supporting it, the entire Japanese economy could take a hit if the industry falters.

About 16 million new vehicles are sold in the United States each year, and 30% of these vehicles are Japanese. In recent years, Japanese automakers have focused on the United States as their “breadwinning market,” particularly because of the weak yen and the strong sales for large and expensive vehicles in the States. However, the new tariffs could change this calculus.

In the January-October period of 2024, Toyota Motor Corp. produced 47% of the cars it sold in the United States within the country, according to Nomura Securities Co., with the majority of its vehicles being imported from Japan, Canada and Mexico. The new tariffs could reduce Toyota’s operating income by about 30%.

Mazda Motor Corp. and Subaru Corp. are expected to be more severely impacted by the tariffs. Mazda manufactures 80% of its vehicles sold in the United States in Mexico and Japan. While Subaru produces more than half of all its vehicles in the United States, it relies heavily on the U.S. market, which accounts for more than 70% of its global sales.

Nomura Securities suggested that both companies “will likely have to review their manufacturing bases and procurement sources” and that Mazda might run an operating deficit.

Since many companies are downstream of the auto industry, the tariffs will likely put a drag on the wider Japanese economy. Masanori Katayama, chairman of the Japan Automobile Manufacturers Association, Inc. and chairman of Isuzu Motors Ltd., said at a press conference on March 19 that if tariffs were imposed, exports to the United States would slump and “production adjustments would be expected” in Japan. The Dai-ichi Life Research Institute Inc. predicts the tariffs will reduce domestic production, pushing down Japan’s real gross domestic product by as much as 0.52%.