Impact of Proposed Tariffs on Japanese Automakers and the Supply Chain

Japanese automakers like Nissan, Toyota, Mazda, and Honda face significant risk from proposed U.S. tariffs on automobile imports. These companies have manufacturing bases in Mexico and Canada, heavily relying on exports to the U.S. The potential increase in tariffs could lead to extensive economic repercussions for both nations, prompting Japanese manufacturers and the government to prepare and seek diplomatic solutions.

Japanese automakers, including Nissan, Toyota, Mazda, and Honda, have significant manufacturing operations in Mexico, producing large quantities of vehicles primarily for the U.S. market. In 2023, Nissan manufactured over 615,000 cars in Mexico, with about 40% exported to the U.S., while Toyota exported around 90% of its 250,000 cars produced there. Mazda and Honda also contributed with substantial exports, making them vulnerable to tariffs imposed by the U.S. government.

Due to impending tariffs, Honda has proactively started transporting cars into the U.S. and is assessing potential price adjustments on its models. They are also reviewing their production locations and exploring new export opportunities. Meanwhile, Asahi Kasei is collaborating with Honda on a parts factory in Ontario, Canada, for electric vehicle batteries, shifting from exporting to the U.S. to selling within Canada.

Former President Trump has discussed increasing tariffs on automobile imports significantly. Currently, the U.S. has a 2.5% tariff on imported vehicles, but Trump suggests this may rise to 25%. Such a change could severely hurt Japanese exports, with cars comprising 25% of Japan’s exports to the U.S., exceeding 40 billion dollars annually.

The Japanese auto industry is urging its government to advocate for exemptions regarding the tariffs. Katayama Masanori, Chairman of the Japan Automobile Manufacturers Association, emphasized the detrimental effects a 25% tariff would have on both economies. Furthermore, the Japanese government has taken steps to assist affected industries, establishing a dedicated team for consultations with businesses facing challenges from the tariffs.

According to economist Kobayashi Shinichiro, the consequences of tariffs will not only impact major automakers but also extend to smaller suppliers as well as industries producing essential materials like steel and semiconductors. He advised Japan’s government to clarify to the U.S. that aggressive tariff policies could provoke negative outcomes for both economies. Moreover, even if Japan achieves tariff exemptions, a broader trade conflict may diminish car demand further.

The potential expansion of tariffs on Japanese automobiles presents serious challenges for the auto industry, impacting both major manufacturers and their supply chains. Japanese companies are taking proactive measures to mitigate effects, while the government is seeking to obtain exemptions. Economic experts highlight the far-reaching consequences of these tariffs, underscoring the need for diplomatic negotiations to prevent adverse economic impacts on both Japan and the U.S.

Original Source: www3.nhk.or.jp