Japan reached a trade deal with the Trump administration that will lower tariffs on its auto imports to 15%. That’s nearly half what the president’s trade war initially imposed on Japanese-made vehicles – but its still six times more than the duties in place before the Trump trade war – which means thousands of dollars in potential price hikes should automakers pass the tariffs on to consumers. More from Headlight.News.
About a third of the vehicles Toyota sells in the U.S. are imported from Japan.
The Trump administration announced a new trade deal with Japan that is a mix of good news and bad news for Japanese automakers and their U.S. customers.
On the positive side, the agreement cuts tariffs on Japanese-made autos nearly by half, to a new level of 15%. But that is still substantially higher than the 2.5% duties that were in place before the Trump administration launched its trade war last spring.
The tariffs, which amount to a sales tax on Japanese vehicles and auto parts purchased by American consumers. While manufacturers have so far absorbed most of those higher duties, the new agreement is expected to push auto prices higher in the months to come, according to independent analysts, who say the increases are too large for manufacturers to absorb long-term.
Japanese government relieved by tariff pact
Nissan said it will drop the Versa with a manual transmission because tariffs will price it beyond consumer acceptance.
While the Trump tariffs continue to threaten the auto industry worldwide, the Japanese government elected to praise the trade deal that replaced older agreements which had pegged the tariffs at 2.5% “The government welcomes US efforts this time towards the steady implementation of the July 22 Japan-US deal,” chief government spokesman Yoshimasa Hayashi told reporters.
While the outcome marked something of a win for Japan, the levies will still cause huge pain for the nation’s industries, auto analysts said. The new tariffs also will hit vehicles made in the U.S. by companies such as Toyota, Honda, Nissan and Subaru since they cover the many imported components used in factories such as the Toyota plant in Georgetown, Kentucky.
For its part, automotive titan Toyota told the French news agency AFP in a statement it hoped the new tariffs could be lowered further.
“We hope that the environment surrounding the automotive industries of both Japan and the United States will continue to improve going forward, based on open and free trade, including further tariff reductions,” the firm said.
New tariffs are retroactive
Even American made models, like the Subaru Crosstrek, face higher costs due to the use of imported parts.
The U.S. order that took effect on Tuesday August 16 but the new 15% tariff cap applies retroactively to August 7.
Like competitors from the U.S., Europe and South Korea, Japanese automakers have struggled to figure out how to cope with the Trump auto tariffs. So far, they’ve largely absorbed the higher duties – but they’ve also curbed imports of some models and made changes to manufacturing strategies. Nissan, for example, said it would end U.S. production of the Versa with a manual transmission, the lowest-priced vehicle in the American market.
Japanese exports to the US dropped 14% in August as tariffs ratchetedd upwards to new higher levels, according to date released by the Japanese government.
New tariffs on Korean cars take hold
The Trump administration previously reached an agreement setting tariffs on imported South Korean goods, including autos and automotive parts to 15%, the same as the new Japan trade deal.
That figure is higher than the taxes that had existed on Korean imports earlier this year, but lower than the 25% tariff that Trump had threatened if a deal wasn’t reached by August 1.
However, relations with South Korea have been disrupted by the Trump administration’s decision to stage an immigrations raid on the massive battery complex Hyundai and partner LG Solution are constructing near Savannah, Georgia. More than 400 workers were arrested, including about 300 South Korean citizens. They were handcuffed and detained by the U.S. Immigrations and Custom Enforcement officers for nearly a week before being shipped back to South Korea this past Monday on charter flights.
Tariff framework with European Union on the table
Negotiators from the U.S. and European Union also have reached a tentative framework for agreement on a trade, coverings some 70% of EU exports to the US.- including autos – with a 15% tariff.
“This is a serious, strategic deal, and we are fully behind it. A wide range of sectors, including strategic industries such as cars, pharmaceuticals, semiconductors, and lumber, stand to benefit,” EU officials said in a statement last month.
The deal has not been finished yet.
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