The Trump administration has lowered tariffs on automobiles imported into the United States from Japan from 27.5% to 15%.
President Donald Trump signed an executive order on September 4 to reduce the auto tariffs, per the Japan-US trade agreement.
Nonetheless, the tariff rate remains five times higher than the 2.5% in place at the start of the Trump administration. We urge domestic automakers to continue to restructure their supply chains, including their production systems, to minimize the impact on the domestic industry.
US President Donald Trump (©AP via Kyodo)
How It Happened
When the Trump administration started, tariffs on Japanese auto imports stood at 2.5%. However, in April, the Trump administration imposed an additional 25% tariff on imported automobiles. According to the US side, the purpose was to reduce the US trade deficit and achieve other goals.
As a result, the tariff rate on Japanese cars was raised abruptly to 27.5%. The Japanese government subsequently negotiated with the US side in an effort to have the additional tariffs removed. In July, the two sides finally agreed to set the tariff rate at 15%.
Although the applicable tariff rate has dropped to 15%, the impact on the profits of Japan’s motor vehicle manufacturers will still be significant. The aggregate impact of Trump’s tariffs on the operating profit of the seven major automakers is estimated to reach approximately ¥2.7 trillion JPY ($18.4 billion USD). For Toyota alone, operating profit is projected to drop by ¥1.4 trillion ($9.5 billion).
Each of these companies will now have to take comprehensive measures to minimize the impact of the tariffs.
Minister of State for Economic Revitalization Ryosei Akazawa answers questions at the Upper House Budget Committee. September 12, 2025 (©Sankei by Ataru Haruna)
What to Look For
With the tariff rate now set at 15%, expect a growing trend for automakers to pass on the increased cost to local sticker prices.
Of the approximately 8.23 million vehicles produced in Japan in 2024, just over half were exported. Notably, one-third of those went to the United States. If sales fall due to price hikes, it would inevitably affect exports and trigger a decline in domestic production.
Automakers will also need to reconstruct optimal supply chains, including the production systems. For exports from Japan, carmakers are expected to focus on luxury cars and products whose sales would be minimally affected, even if the tariff increases are passed on. Hybrid vehicles, which are expected to sell in large numbers, are more likely to be produced in local markets.
As automakers proceed, they must consider the impact on domestic business partners such as parts manufacturers. Including related industries, Japan’s automobile industry is the nation’s largest core industry, employing approximately 5.5 million people.
To minimize the impact of Trump’s tariffs, the government should also do everything possible to support small and medium-sized enterprises.
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(Read the editorial in Japanese)
Author: Editorial Board, The Sankei Shimbun
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