It has been months since the deal was announced, but the U.S. trade war with Japan could be reaching a detente in a few more weeks.
The White House announced in July that it had reached a new tariff deal with Japan. While the Japanese made multiple concessions, the biggest sticking point in the negotiations was the 27.5% tariffs on Japanese auto imports.
“There’s no point striking a deal with the U.S. without an agreement on automobile tariffs,” Ryosei Akazawa, Japan’s lead trade negotiator, said at the time.
Top auto importers to U.S. in 2024
- Mexico: 22.8%
- Japan: 18.6%
- South Korea: 17.3%
- Canada: 12.9%
- Germany: 11.7%
According to World’s Top Exports count, nearly 20% of the money U.S. consumers spent on auto imports went to Japanese car companies. The only country with a higher percentage was Mexico.
But as always, the devil is in the details, and despite the White House’s proclamation, none of the important details of the deal had been worked out.
Until this week.
Image source: Bloomberg/Getty Images
Japan expects tariff deal to take effect by the end of September
Japan and the United States are in the final stages of securing a deal that would lower tariffs on Japanese auto imports, Reuters reported from Tokyo Sept. 4.
Sources across the Pacific told the news organization that the 15% tariff rate could be implemented within 10 to 14 days after the issuance of a U.S. presidential executive order.
Akazawa flew to Washington Sept. 4 to “press the United States” on issuing the order, according to the report. Akazawa was scheduled to visit Washington the previous week, but “suddenly canceled” the trip scheduled for August 28 through 30.
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Akazawa canceled his trip last week because “some administrative matters needed to be confirmed,” government officials said at the time.
Now, the executive order is expected to include language guaranteeing that the 15% tariff agreed to earlier this summer would not be stacked on top of Japanese imports that are subject to higher tariff rates, while items previously subject to less than 15% would be adjusted to 15%.
It’s easy to see why Japan is willing to have higher import costs for other goods in order to gain lower costs for automotives when one considers how large the Japanese auto industry is in the U.S.
Japanese automakers Toyota and Honda are two of the top five-selling U.S. brands
According to one estimate, Japan exported $40.76 billion worth of cars to the U.S. in 2024, representing nearly 19% of all auto imports.
Toyota sold over 2.3 million vehicles in the U.S. in 2024, a 3.7% year-over-year increase. According to Cox Automotive data, Japanese brands were two of the top five-selling cars in the U.S. last year.
Top-selling car brands in the U.S. in 2024
- GM: 2.68 million vehicles, +4.2% yoy, market share 16.5%
- Toyota: 2.33 million vehicles, +3.9% yoy, market share 14.4%
- Ford: 2.05 million vehicles, +3.8%, market share 12.7%
- Hyundai: 1.68 million vehicles, +1.8% yoy, market share 10.6%
- Honda: 1.4 million vehicles, +8.1% yoy, market share 8.4%
But Japanese brands don’t just ship cars to America; they also build them here.
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Last year, Japanese auto manufacturers produced 3.28 million vehicles in the U.S.
Honda, Subaru, Nissan, Mazda, and Toyota combined employed nearly 75,000 manufacturing employees in the U.S. last year.
Japan Automobile Manufacturers Association (JAMA) says its members have spent $4.6 billion on research and development.
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