US Lowers Tariffs on Japanese Automobiles from 25% to 15%
Tariff Impact Already Affecting American Companies
Japanese Firms See Stock Rebound Immediately After Announcement
The fortunes of automakers in the United States and Japan have diverged after the two countries reached a final agreement in their tariff negotiations to lower itemized tariffs on Japanese automobiles from 25% to 15%.
The American Automotive Policy Council (AAPC), which represents the three major U.S. automakers?General Motors (GM), Ford, and Stellantis, the parent company of Chrysler?stated on July 22 (local time) that this agreement would be harmful to American industry and auto workers, according to a report by Reuters.
Matt Blunt, chairman of the AAPC, said, "Any agreement that imposes a lower tariff on Japanese imports?many of which contain virtually no U.S. parts?than on vehicles manufactured in North America, which use many U.S. parts, is a bad deal for American industry and auto workers."
On this day, the U.S. and Japanese governments announced that they had agreed to lower reciprocal tariffs on Japanese goods from 25% to 15%. For automobile tariffs, the rate was reduced by half from 25% to 12.5%, and when combined with the previously applied 2.5% rate, the final agreed tariff stands at 15%.
The impact of these tariffs on U.S. automakers is already becoming a reality. GM, while announcing its second-quarter earnings on this day, stated that the damage from tariffs had reached $1.1 billion and that losses would be even greater in the third quarter. This is because the company imports parts from overseas and operates finished vehicle manufacturing plants in countries such as Mexico and South Korea.
President Trump, in April, temporarily reduced the tariff burden for two years on companies that manufacture vehicles in the U.S. using imported parts, but maintained the 25% tariff on imported finished vehicles.
In contrast, Japanese automakers have benefited from the reduction in automobile tariffs as a result of the trade negotiations. Immediately following the announcement, Toyota's stock rose by more than 15%, while Honda, Mazda, Nissan, and Mitsubishi all saw increases of between 9% and 17%, showing strong collective gains.
Korean automakers Hyundai and Kia also rose by approximately 6% to 7%. This is seen as the market reflecting expectations in advance based on the Korea-U.S. trade agreement. Kim Jeonggwan, Minister of Trade, Industry and Energy, also departed for the United States on the 3rd to participate in the tariff negotiations. South Korea aims to conclude negotiations before the U.S.-imposed deadline for reciprocal tariffs on August 1.
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