U.S. Auto Tariffs: Japan Cannot Avoid Severe Blow If Duties Are Imposed on the Nation

Editorial

17:28 JST, March 3, 2025

It has become increasingly likely that U.S. President Donald Trump’s policy of high tariffs will be applied to the automobile sector. If high tariffs are imposed, it will be a major blow to the Japanese economy as a whole.

While urging the United States to exercise restraint, the government must negotiate with Washington to ensure that Japan is exempted from such tariffs.

Trump has been announcing a flood of high tariffs and has indicated an additional plan to impose a tariff of around 25% on automobiles. He said he would announce the details on April 2.

Although the envisaged target countries are unknown, it is strongly believed that Japanese cars, which are imported to the United States in large numbers, will be subject to tariffs, and the automobile industry among others is increasingly alarmed by the situation. On Feb. 25, Economy, Trade and Industry Minister Yoji Muto took the unusual step of inviting top executives from many automakers to hear their opinions.

The government should expedite efforts to gather information on the movements in Washington.

About 16 million new cars are sold in the United States each year, and about 6 million of them, or a more than 30% market share, are made by Japanese manufacturers such as Toyota Motor Corp. Japanese companies produce vehicles at factories in the United States and also export vehicles from plants in such locations as Mexico and Canada.

In addition, many cars produced in Japan are exported directly to the United States, with the total number standing at about 1.38 million in 2024. If high tariffs are imposed on these cars, the manufacturers will be forced to hike prices, possibly resulting in a significant decline in sales.

Japan exported about ¥21 trillion worth of goods to the United States in 2024, with automobiles accounting for nearly 30%, or about ¥6 trillion. The car industry also employs about 5.5 million people, including those working in companies related to automakers.

Automobile manufacturers play a leading role in the annual shunto spring wage negotiations, and if their profits worsen, the negative impact on the Japanese economy will be enormous.

Muto is said to be planning a visit to the United States in March to negotiate with the U.S. government to exempt Japan from the envisaged tariffs.

At the recent Japan-U.S. summit, Japan promised to continue investing in the United States and increase imports of U.S.-produced liquefied natural gas. It is important for Muto to firmly convey how much Japan has contributed to the U.S. economy.

There are also concerns that automobile tariffs could cause major disruptions to the supply chain.

Many car parts are said to be transported across the borders between Mexico, Canada and the United States multiple times during the manufacturing process. If high tariffs are imposed each time, prices will surge, which will also have a negative impact on U.S. automakers.

Trump may want to encourage production bases to return to his country, but it is not easy to boost manufacturing in the United States, where wages are at the highest level in the world. For the time being, won’t the plan only result in accelerating domestic inflation in the United States and make its consumers suffer?

Japan, Europe and other countries should continue to explain to Washington the harm it will incur.

(From The Yomiuri Shimbun, March 3, 2025)