Japan raises auto tariff issue with U.S. as Trump threatens hike

Japan has raised the issue of auto tariffs with the United States after U.S. President Donald Trump threatened to impose a 25% levy on car imports, a move that would likely deliver a big blow to Japan’s economy.

Tokyo is closely watching any potential impact stemming from higher levies, which the president said might officially be unveiled as soon as April 2. Economists estimate the impact would be substantial given that cars make up the largest component of Japan’s exports, with the U.S. as the No. 1 market.

“We have been raising the issue with the U.S. government, given the importance of Japan’s automobile industry,” Chief Cabinet Secretary Yoshimasa Hayashi said at a news conference on Wednesday. “Japan will first carefully examine the specific details of the measures that will come out and their impact on Japan, and then respond appropriately.”

Hayashi’s remarks come after Foreign Minister Takeshi Iwaya raised the issue with his counterpart, Marco Rubio, last week, when Tokyo also asked for exclusion from Trump’s reciprocal tariffs. The Asian nation is also seeking exclusion from his fresh tariffs on steel and aluminum.

It’s not clear if Japan is also seeking an exemption from the auto tariffs as trade minister Yoji Muto didn’t respond directly on Tuesday when asked about it. Japanese firms may also be hit by 25% tariffs on the chips and pharmaceutical sectors as well, though details are still scarce.

The impact from tariffs will be much bigger for Japan’s auto sector compared to other industries, and there is a good chance that Japanese cars will be targeted given Japan is among the top car exporters to the U.S., according to analyst estimates. Auto-related companies including material providers employ 5.58 million workers in Japan, or 8.3% of the country’s total workforce, according to the Japan Automobile Manufacturers Association (JAMA).

In 2024, auto exports accounted for 17% of all outbound shipments for Japan, with more than a third of them going to the U.S.

Taking auto parts into account, car-related exports equated to a third of all shipments to the U.S. That played a big role in keeping Japan’s trade surplus with the U.S. at a high level, a fact that risks Trump’s ire as the president aims to use tariffs to lessen the U.S.’s trade deficits and pressure other nations to build factories in the U.S.

Still, Japan already makes more cars in the U.S. than it exports, according to JAMA estimates. In 2023, Japanese carmakers made 3.3 million cars in America, more than twice the 1.5 million cars they exported to the country.