By Rina Ukita and Daisuke Narahashi
Yomiuri Shimbun Staff Writers
The United States will halve the additional tariffs imposed on automobiles imported from Japan from 25% to 12.5% under the agreement reached Tuesday in negotiations between the two countries.
Major Japanese automakers have responded positively to this news, which will somewhat mitigate the effects of the tariffs. However, the additional tariffs remain in place, and companies are likely to be forced to take measures such as raising prices in the U.S. market in the future.
After the administration of U.S. President Donald Trump imposed an additional 25% tariff on top of its basic tariff in April, the Japan Automobile Manufacturers Association and others strongly urged the government to negotiate the added tariffs down as much as possible. Association Chairman Masanori Katayama, who is also CEO of Isuzu Motors Ltd., commented on Wednesday evening: "We would like to express our gratitude (to the negotiators) for reaching an agreement that includes automobiles, despite the wide range of issues under negotiation. This will mitigate the potentially devastating impact on the automotive industry and avoid the worst-case scenario for our customers in the United States."
"It is a reasonable figure," said an official at one major automaker about the agreement.
There had been some concern that negotiations between Japan and the United States could drag on for a long time, so this agreement has helped to dispel some of the uncertainty about the future.
However, this will not make the additional tariffs go away. "Even if the tax rate is lowered, it's only in reaction to the high ball thrown at us that things appear to have settled down," said another official at a major automaker.
For major Japanese automakers, the United States, where large, high-end vehicles sell well, is an important market that contributes significantly to profits. In particular, about half of the vehicles sold in the United States by Subaru Corp. and Mazda Motor Corp. are exports, and Mitsubishi Motors Corp. exports all of its vehicles sold on the U.S. market from Japan.
Automobile exports to the United States are also important for the Japanese economy, accounting for nearly 30% of Japan's total exports to the United States in 2024, with a value of about 6 trillion yen.
Since the imposition of additional tariffs in April, major automakers have refrained from significantly raising prices in the United States, and "pretended to be okay," according to a senior executive at a major automaker.
However, this strategy is nearing its limits. In the United States, it is common for automakers to make minor vehicle improvements and price adjustments in September. As a senior official at the Economy, Trade and Industry Ministry put it, "they'll raise their prices then, won't they?" The agreement will likely enable companies to keep from increasing their prices too much.
Additionally, the agreement increases the likelihood that automakers will be able to avoid shifting production from Japan to the United States. The yen has been weakening against the dollar in foreign exchange markets. "Considering exchange rates, it would be better to export from Japan even with a 12.5% additional tariff," said an executive at a major automobile company.
With the tariff rate now set, major automakers will rush to calculate the impact in specific monetary terms.
According to Goldman Sachs Japan Co., if a total tariff of 15% is imposed on passenger vehicles, the operating profits of seven major automakers, including Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., will fall by approximately 1.9 trillion yen in total.
It will be difficult for major automakers to absorb all tariff costs, and they will need to enhance productivity through support measures such as investing capital in parts suppliers to build a system that covers U.S. tariffs across the entire supply chain. "(The question is) how to support domestic industries," said Ryosei Akazawa, economic revitalization minister and Japan's chief negotiator, to the media on Tuesday during his visit to the United States. "We will take whatever measures are necessary," he emphasized.
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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July 24, 2025 22:20 ET (02:20 GMT)
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