The Japanese government has expressed its dismay at US President that all vehicles imported into the US will be subject to a 25% tariff from April 2.
Prime Minister Shigeru Ishiba has called on Washington to exempt Japanese car makers from the levy, which would come on top of the 2.5% existing duty.
If Tokyo is unable to , then car manufacturers and the broader Japanese economy could feel some pain.
“The overall impact on business here in Japan will be serious,” said Martin Schulz, chief policy economist for Fujitsu’s Global Market Intelligence Unit.
“Almost one-third of Japan’s exports are autos or in related sectors and, put together, the industry accounts for 8% of overall employment here,” he told DW, adding that the tariffs are poised to shrink the Japanese economy by 0.2%.
“When prices go up by more than a quarter because of these tariffs, the question becomes who will swallow those added costs,” Schulz said.
“We will see a combination of higher prices for US consumers and lower demand, but it is a lot more complex than that because Japanese companies offer models that are not easy to replace, such as electric vehicles,” he added.
Tariffs tangle supply chains
Another complicating factor will be imposed on components that are imported, sometimes multiple times as part of the overall manufacturing process.
Analysts point out that Japanese companies that invested heavily in production facilities in Mexico and Canada on the understanding that cross-border trade with the US would remain unimpeded have been caught out by the increasingly protectionist position of the second Trump presidency.
Car makers here have remained largely silent on the news from Washington, almost certainly out of a desire to not further antagonize the administration.
However, there is also a sense that Trump has spurned Tokyo’s efforts to build ties with the White House after PM Ishiba held talks that Japan considered to be friendly with the president in February.
“Japan has made significant investments and significant job-creation, which does not apply to all countries,” Ishiba told a press conference on Thursday. “We are the number one [country] in investment in the United States.”
Yoshimasa Hayashi, the chief cabinet secretary, also weighed in to underline Tokyo’s position.
“We believe that the current measures and other broad-based trade restrictions by the US government could have a significant impact on the economic relationship between Japan and the US, as well as on the global economy and the multilateral trading system.”
Japan hopes for an exemption
“In response to this announcement, we have again told the US government that this measure was extremely regrettable,” Hayashi added. “We strongly urged the US government to exclude Japan from the scope of this measure.”
Schulz is not optimistic that the Japanese government will be able to convince Trump that it needs to be recognized as a special case.
“I do not think trade negotiations will be very successful because they often bring together a range of different tariffs and proposals that must be balanced on both sides, on items such as imports of against car tariffs,” he pointed out.
“To do that takes negotiations, but these decisions are being made in the White House and are issues close to Trump’s heart,” he said. “Japanese negotiators just can’t get to him to make Tokyo’s case.”
At present, Japanese auto firms account for around 16% of the vehicles imported into the US, ahead of the 15% from South Korean manufacturers, with analysts suggesting that the tariffs will impose an additional cost on Japan’s big six car firms amounting to some $11.4 billion.
US consumers ‘the biggest loser’
Takaki Nakanishi, CEO of the Tokyo-based Nakanishi Research Institute and a specialist in the auto sector, told DW that since the tariffs are the same for all imported vehicles, the impact will not be limited to only .
“There will be pain in the sector, but it will be felt all over the world and Japan will not be at a disadvantage,” he told DW.
“Of course, the biggest loser will be the US consumer and the US economy, although I imagine Trump supporters will not really understand what is happening until there are more economic problems, such as prices rising or damage to the stock market,” he added.
However, Nakanishi is optimistic that might still come round to Tokyo’s way of thinking.
“It is very hard to say what is going to happen because the president changes his mind easily, but I do think Japan has room to negotiate,” Nakanishi suggested.
“In my view, the disagreement is much stronger with Europe because governments there are considering reciprocal tariffs. That could work out to be an opportunity for Japan.”
Edited by: Wesley Rahn
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