On Monday, July 7, US President Trump announced a 25% tariff on all imported goods from Japan, to be implemented starting August 1. Japanese Prime Minister Shintaro Ishiba stated that negotiations on tariffs with the US will continue. Meanwhile, Japanese car manufacturers are exploring various solutions to help Japan reduce its trade imbalance with the US.
According to Nikkei News, Toyota is considering exporting cars produced in the US to Japan or having its dealers in Japan assist in selling American brand cars. Japanese car dealers typically sell cars from only one manufacturer or brand, whereas American dealers typically sell cars from multiple manufacturers or brands.
This is not the first time that Toyota has sold American brand cars in Japan. In the 1990s, Toyota had sold Chevrolet Cavaliers produced by General Motors and Scepter wagons produced by Toyota in the US.
In response to Trump’s imposition of a 25% tariff on foreign cars, Japanese car manufacturers are preparing to raise prices on vehicles sold in the US or further increase production of cars in the US.
Ryutaro Kono, Chief Japanese Economist at BNP Paribas in Paris, expressed concerns about car tariffs in his report last week. He wrote, “Any proposal to maintain car tariffs at 25% or above is unlikely to be accepted by the Japanese government.”
At a meeting on May 1, Toyota Chairman Akio Toyoda discussed with Prime Minister Ishiba. Toyota Executive Vice President Hiroki Nakajima also attended the meeting and mentioned in a video on the company’s website that, “Toyota produces a large number of cars in the US. If the trade deficit is a problem for the US, we would not rule out the possibility of importing Toyota cars made in the US to Japan.”
He added, “If any American car manufacturer exports their cars to Japan, I think utilizing Toyota’s sales network to help sell those cars is an option.” According to him, there are 163 sales points for American cars in Japan, compared to 1,930 for European cars. Toyota has over 4,000 sales points in Japan.
“When Mr. Toyoda and Mr. Ishiba discussed this, we did not say we would do it, but we did discuss the possibility,” said Nakajima.
Trump has long complained about the low market share of American cars in Japan. According to data from the Japan Automobile Importers Association, Jeep accounts for 2.51% of total registered imported cars in Japan from January to June this year. During the same period, Cadillac and Chevrolet had market shares of 0.16% and 0.11% respectively.
Since 1978, Japan has not imposed any tariffs on imported cars; however, Trump insists that there are non-tariff barriers against American cars. It is reported that in earlier negotiations with the Trump administration, the Japanese side had considered facilitating the approval process for American car production, but it is unclear if this idea has materialized.
Nakajima emphasized that for foreign brands to gain broad acceptance in the Japanese market, cars must meet some local requirements. Firstly, Japan has many narrow streets, requiring cars to have appropriate sizes to navigate them. Secondly, due to the prevalence of car-to-pedestrian accidents in Japan rather than car-to-car collisions, Japanese product regulations often focus on whether car designs can reduce harm to pedestrians in accidents rather than on protecting drivers.
Due to a surge in accidents caused by elderly drivers mistakenly pressing the accelerator, Japan also requires cars to be equipped with automatic braking systems activated by sensors.
Japanese car manufacturers are closely monitoring the progress of negotiations as the US is their primary market, accounting for about 30% of Japan’s annual car exports.
Some Japanese manufacturers have started reflecting the potential impact of tariffs in US retail prices. Toyota announced that it will increase car prices by an average of $270 from this month. Jeffrey Guyton, CFO of Mazda, stated at the company’s annual shareholder meeting last month that the company is seeking to raise the prices of cars sold in the US. By the end of the fiscal year in March 2025, Mazda sold over 435,000 cars in the US, accounting for more than 30% of its total sales.
On the other hand, Japanese manufacturers are planning to increase the number of cars produced domestically in the US. For example, Guyton stated that the company hopes to produce cars at a plant in Alabama to avoid tariffs.
By the end of the fiscal year 2025, Subaru’s car sales in the US accounted for 70% of its total sales. The company is investing 40 billion yen ($276 million) to expand capacity in the US.
Honda is considering shifting production from Mexico and Canada to the US to increase production in the US. The company is also exploring the possibility of business cooperation with Nissan in the US.