In a move that could have far-reaching consequences for the U.S.-Japan economic relationship and global trade, President Donald Trump has announced a 25% tariff on all cars not made in the United States. Japan responded swiftly on Thursday, warning that the tariffs could significantly impact its economic ties with the U.S. and disrupt global trade.
Japan, a key economic ally of Washington, is one of the largest investors in the United States, with the auto sector alone supporting roughly one in ten Japanese jobs. The country’s economy is highly intertwined with U.S. industries, particularly in the automotive market, where Japanese manufacturers play a crucial role.
Effective April 3, the tariffs will target all foreign-made vehicles, except those produced in the U.S. Prime Minister Shigeru Ishiba, who recently met with Trump at the White House, stressed that Japan was evaluating an “appropriate” response to this new measure.
“Japan has made significant investments in the U.S. and created numerous jobs. This doesn’t apply to all countries,” Ishiba remarked. He added that Japan’s investments have been key in strengthening U.S.-Japan economic ties, with Japan ranking as the largest foreign investor in the U.S.
Japan’s government spokesperson, Yoshimasa Hayashi, voiced concerns that the tariffs, along with other potential trade restrictions, could harm both the U.S.-Japan economic relationship and the broader global economy. “This measure is extremely regrettable. We have strongly urged the U.S. to exempt Japan from these tariffs,” Hayashi said.
Meanwhile, South Korea has already begun to formulate a response to the tariffs, with Trade Minister Ahn Duk-geun holding emergency meetings with major automakers to discuss countermeasures. Ahn promised that a comprehensive plan to support the auto sector would be unveiled by April.
The tariffs sent shockwaves through the automotive industry, with major Japanese car manufacturers seeing stock prices tumble. Toyota, the world’s largest automaker, dropped by 2%, while Nissan and Honda followed suit with declines of 1.7% and 2.5%, respectively. In South Korea, Hyundai saw a sharp 4% dip in shares.
Japanese officials have long lobbied for exemptions from U.S. tariffs on vehicles and steel, but their requests have so far been denied. The Trump administration argues that these tariffs will help boost American industry, raise government revenue, and pressure foreign governments to comply with U.S. trade priorities. However, critics contend that the tariffs will only lead to higher prices for U.S. consumers.
Approximately 50% of cars sold in the U.S. are domestically produced, with Japanese automakers accounting for around 16% of car imports and South Korean manufacturers contributing 15%. Economists have warned that the new tariffs could have a negative impact on Japan’s economy, potentially shrinking it by 0.2%, and leading to job losses and a decline in domestic production.
Takahide Kiuchi, an economist at Nomura, explained that the tariffs could lead to a contraction of Japan’s economy. Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory, estimated that the tariffs could result in an additional $11.4 billion in costs for Japan’s top automakers, further amplifying the potential economic impact.
With such high stakes, Japanese automakers are still evaluating the potential consequences. “We are studying the impact of these tariffs on our business and will take measures to minimize the effects,” said a Honda spokesperson.
As the situation unfolds, many are hoping for a diplomatic resolution that will allow the U.S. and Japan to find common ground and avoid further economic tensions.
About The Author
