Trump Declares 25% Tariff on Cars

President of the United States, Donald Trump, on March 26th announced that he decided to impose additional 25 percent of tariff for all importing cars starting on April 3rd and for automobile parts on May 3rd. Trump’s tariff on cars is regarded as the main part of his tariff policies and supposed to have a significant impact on Japanese economy. The option so far for Japan to take is persuading US administration to exclude Japan from the list for imposing the tariff. 

The biggest car exporter to US in 2024 was Mexico with 48.7 billion dollars. Japan followed it with 39.9 billion dollars, followed by the Republic of Korea, Canada and Germany. Trump hopes car manufacturers to get back to the US and increase jobs for US workers. “Frankly, friend has been oftentimes much worse than foe. And what we’re going to be doing is a 25% tariff on all cars that are not made in the United States,” said Trump to the reporters. He called it “liberation day.”

 

It is likely that the tariff on imported automobile to the US will jump up from 2.5 percent to 27.5 percent, and from 25 percent to 50 percent for trucks. Recognizing large amount of parts, such as engine or transmitter, are loaded on the cars produced in the US, 25 percent tariff will also added on the parts from foreign country. Trump is supposed to appropriate the additional income from tariff for tax cut that he embraced in his election campaign.

 

Car manufacturers are Japan’s main exporters. Car exports from Japan to the US in 2024 amounted to 6.26 trillion yen ($41.7 billion), occupying 28.3 percent of all exports from Japan to the US. Nikkei Shimbun estimates that the tariff may damage to Japanese economy worth 13 trillion yen ($86 billion), if it causes decrease of car production along with decline of exports.

 

Prime Minister Shigeru Ishiba stressed that he would take every choice on the issue. “We strongly urge the US not to apply 25 percent tariff on Japan,” told Ishiba in a discussion at the Upper House. Ishiba brought his staffs three points: requesting US exclusion of Japan, taking measures for supporting related industries and workers and integrated actions of the government of Japan.

 

Japan has been too optimistic to be ready for Trump’s hostile policy against Japan, in spite of his announcement of additional tariffs on foreign goods on the day one as the president. Trump’s exclusion of Mexico and Canada under the USMCA was what Japan must have expected from Trump administration. It is discussed in Ishiba administration that it would offer further investment to the US or removing some non-tariff barriers on goods from the US. However, there is not much argument for retaliatory measures against the Trump tariffs, being afraid of escalation of the tariff war.

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