Japan Broaches Car Tariffs With US as Trump Threatens Hikes
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Japan has raised the issue of auto tariffs with the U.S. after President Donald Trump threatened to impose a 25% levy on car imports, a move that would deliver a big blow to Japan’s economy.
Tokyo is closely watching any potential impact stemming from higher levies, which the president said might 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 U.S. as the No. 1 market.
“We have been raising the issue with the U.S. government, given the importance of Japan’s automobile industry,” Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said at a press conference Feb. 19. “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 last week, when Tokyo also asked for exclusion from Trump’s reciprocal tariffs. The Asian nation is also seeking exclusion from his fresh tariffs on steel and aluminum.
On Trade, I have decided, for purposes of Fairness, that I will charge a RECIPROCAL Tariff meaning, whatever Countries charge the United States of America, we will charge them - No more, no less!
For purposes of this United States Policy, we will consider Countries that use the… — Donald J. Trump (@realDonaldTrump) February 17, 2025
“Considering that around a third of exports to the U.S. are cars, the impact on the Japanese economy will be significant,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “If a 25% tariff is imposed on all countries, car prices in the U.S. will rise, and if purchasing demand doesn’t keep up, that also means demand for Japanese exports will fall.”
It’s not clear if Japan is also seeking an exemption from the auto tariffs as Trade Minister Yoji Muto didn’t respond directly on Feb. 18 when asked about it. Japanese firms may be hit by 25% tariffs on the chips and pharmaceutical sectors as well, though details are scarce.
Exports of chips and chipmaking devices made up only 3.7% of Japan’s total shipments to the U.S. in 2024. Medical items accounted for only 1.9% of the total. In a reflection of concerns over Japan’s key industries, sub-groups within the benchmark Topix index representing cars, pharmaceuticals and precision machinery were all underperforming the overall index Feb. 19.
The impact from tariffs will be much bigger for Japan’s auto sector compared to other industries, as car and car parts made up a little over a third of Japan’s exports to the U.S. last year. There’s a good chance that Japanese automobiles will be targeted given Japan is among the top car exporters to the U.S.
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That would be a hit to many workers in Japan, as auto-related companies including material providers employ 5.58 million people in the country, or 8.3% of the total workforce, according to the Japan Automobile Manufacturers Association.
Last year, auto exports accounted for 17% of all outbound shipments for Japan, with more than a third of them going to the U.S. That played a big role in keeping Japan’s trade surplus with the U.S. at a high level, a fact that risks Trump’s ire as the president aims to use tariffs to lessen the U.S.’s trade deficits and pressure other nations to build factories in the U.S.
Still, Japanese manufacturers already make more cars in the U.S. than they export to the market from their home country, according to JAMA estimates. In 2023, Japanese carmakers made 3.3 million cars in the U.S., more than twice the 1.5 million cars they exported to the nation.
