The United States President, Donald Trump has made the tariffs drama much more intense when he slapped a 25% tariff on imported cars. This move has affected most of the countries and the automotive industries in Japan and South Korea is no exception.
Announced Thursday, the tariff follows his recent criticism of auto trade imbalances, particularly targeting Japan’s Toyota. “Toyota sells 1 million foreign-made automobiles into the United States. … [However] none of our companies are allowed to go into other countries,” he said during a speech marking what he dubbed “Liberation Day in America.”
Signed into action last week, the tariff is poised to hit Japanese carmakers hard. A report from analyst Kohei Takahashi from UBS Securities estimates that Japan’s top seven automakers could face added costs totalling over 3.5 trillion yen (~RM122 billion), with Toyota alone absorbing up to 1.8 trillion yen (~RM63 billion). He also suggests that some companies may be forced to shift production to the US to absorb the impact.
Japan’s Automobile Manufacturers Association (JAMA) revealed that the US was the top destination for Japanese car exports in 2023. With cars making up roughly 30% of Japan’s exports to the U.S. last year, the economic blow could be significant. JAMA chairman Masanori Katayama has urged both governments to engage in constructive talks to stabilise the industry.
Mazda’s CEO Masahiro Moro responded cautiously, noting that the company is constantly evaluating policies and cost-saving measures. The US remains the automaker’s biggest market, responsible for 34% of its sales between April and December 2024.
Meanwhile, Takahide Kiuchi from Nomura Research Institute warned that the new tariffs, combined with earlier trade measures, could shrink Japan’s GDP by up to 0.76%. He emphasised the knock-on effects on employment and domestic production, particularly among smaller parts suppliers.
South Korea’s Hyundai and Kia are also under pressure. Hyundai CEO Jose Munoz assured customers that prices won’t go up – for now – but acknowledged the challenges. The company has already moved to boost US-based production, recently launching a new plant in Georgia capable of producing 300,000 electric and hybrid cars annually.
Still, Hyundai and Kia export a large chunk of their US inventory from South Korea, making them vulnerable. Moody’s analyst Mic Kang pointed out that fierce competition and already high prices leave little room to pass on tariff costs to American consumers.
This could also affect the price of Japanese cars in Malaysia. With they being forced to pay up the tariffs, it is only logical that they would eventually raise the prices of their cars in other region markets. Nevertheless, Trump insists the tariffs are here to stay, though experts suggest only rising domestic backlash could force a policy reversal.
(Source: Nikkei Asia)
