GDP Increase / Impact of High U.S. Tariffs Mitigated for the Time Being

Editorial

16:48 JST, August 16, 2025

Although the impact of the high tariff policy of U.S. President Donald Trump’s administration has been limited, sluggish personal consumption due to rising prices remains a concern.

It will be important for companies to formulate aggressive investment strategies and continue substantial wage increases.

The real gross domestic product for the April-June quarter increased by an annualized 1.0% from the previous quarter, according to a preliminary report. The January-March quarter was revised from negative to positive, marking five consecutive quarters of positive growth.

In April, the U.S. government imposed 10% “reciprocal” tariffs, with an additional 25% tariff on automobiles, raising concerns about adverse effects. However, Japanese automakers lowered export prices and focused on maintaining export volume rather than securing profits. As a result, overall exports increased by 2.0%.

Capital investment rose by 1.3%, driven by robust investment in software to advance digitalization.

Thanks to the efforts of companies to mitigate the impact of Trump’s tariffs, the latest GDP data apparently confirmed that the Japanese economy is on a moderate recovery track.

In late July, the United States and Japan reached a tariff agreement, which has somewhat dispelled the uncertainty about the future. Buoyed by the agreement, the Nikkei stock average has hit a record high and is now at the 43,000 level.

The stock market rally is a tailwind for a growth-oriented economy in which both wages and investment are increasing. Companies need to proceed with domestic investment and wage increases. The government should strongly urge the U.S. government to determine the timing for lowering its automobile tariffs and other details at an early stage.

However, there are many points to watch out for. Personal consumption, which accounts for more than half of the GDP, increased by only 0.2% from the previous quarter due to sluggish sales of beverages and other items. This suggests that households remain keen on saving.

Although the impact of the U.S. high tariff policy has been temporarily mitigated, the burden on companies will increase as this policy continues.

If automakers and other companies continue to absorb tariff costs, their profits will be squeezed. Eventually, they will have no choice but to raise prices to offset the tariffs. If that occurs, their price competitiveness in the United States will decline, and there is a possibility that consumers will refrain from purchasing their products due to the price hikes.

Trump’s tariff policy is difficult to predict. It is also necessary to be aware of the risk of global economic growth slowing down.

To achieve a strong Japanese economy that is not swayed by external demand, focus should be placed on stable growth driven by domestic demand. To overcome prolonged high prices and stimulate consumption, it is essential for companies to continue to raise wages substantially.

It is hoped that the government will promote investment and improve profitability through such means as labor-saving measures and digitalization to alleviate labor shortages and create an environment that is conducive to wage increases.

(From The Yomiuri Shimbun, Aug. 16, 2025)