Tariff crossfire hits Toyota, Nissan and Ford suppliers in Japan

Japan Times

24-05-2025

Four decades ago, Hiroko Suzuki's father threaded the needle of a U.S. trade war by pushing the family auto parts business into newer niche products. Now, tariffs imposed by the U.S. are so sweeping they threaten her own attempt to diversify the 78-year-old company into medical devices.
Prime Minister Shigeru Ishiba has called the U.S. tariffs, including 25% on automobiles, a "national crisis" for the world's fourth-largest economy. Japan's top trade negotiator, Ryosei Akazawa, left for Washington on Friday for a third round of talks.
The worry is evident at companies like Kyowa Industrial, a maker of prototype parts and race-car components based in Takasaki, Gunma Prefecture. Kyowa, which employs 120 people, was among six auto suppliers who said they were concerned about their ability to withstand the tariff pressure on Japan's car industry.
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"What in the world are we going to do?" Suzuki, Kyowa's third-generation president, recalled thinking when the tariffs were announced. "This is going to be bad."
The problems Kyowa and other auto suppliers face illustrate a decadeslong shift in Japan, which no longer floods the world with chips and consumer electronics and is reliant on an auto industry threatened by intense Chinese competition. That marks a contrast with the 1980s, when the United States slapped trade barriers on a rising Japan and its then-barnstorming exports.
Parts covered for confidentiality purposes are kept inside a factory at Kyowa Industrial in Takasaki, Gunma Prefecture, in April. |
Reuters
This report, which is based on interviews with a dozen people, including industry executives, bankers and senior government officials, provides a firsthand account of how one firm is grappling with the uncertainty, and details the deepening squeeze on the automotive supply chain at a time of profound disruption.
Kyowa and thousands of other small manufacturers comprise an auto-supply network that has for decades pursued a monozukuri (literally, "making things") approach to production. That culture of incremental improvement and assembly-line efficiency, based on methods developed by Toyota, helped make Japan a juggernaut.
But the shift to battery-powered smart cars has meant software, in which electric vehicle (EV) makers such as Tesla and China's BYD excel, has become a bigger selling point.
Kyowa started developing neurosurgery instruments in 2016 after Suzuki, now 65, realized the rise of EVs would eventually hammer demand for engine components. It began selling the instruments in the U.S. last year, only to find that U.S. President Donald Trump's tariffs also applied to medical devices.
Kyowa doesn't export auto components to the U.S., but Suzuki worries automakers will force suppliers to cut prices to offset tariffs. So far, that hasn't happened to her.
One Subaru supplier said his company may have to start looking for partners expanding outside the U.S.
Major automakers have largely offered muted support for suppliers since Trump's tariff announcements. Last month, Toyota, Nissan and Ford sent letters to the U.S. arms of some Japanese suppliers asking for cooperation in the face of tariffs, without offering specifics.
Nissan told suppliers they should stick to previously agreed upon prices. It said it was "not obliged" to bear the costs of tariffs but that it would shoulder some of the hit for up to four weeks to help secure its supply chain. It added that it could later seek to recover any support payments to suppliers.
It could not be determined how much support, if any, Nissan extended. The automakers haven't sent follow-up letters, according to two suppliers, who permitted a review of the correspondence on condition of anonymity.
Workers inside a Kyowa Industrial factory in Takasaki, Gunma Prefecture, in April |
Reuters
Nissan said it was working with suppliers to mitigate the tariff impact and contain costs, including through localization.
Toyota said it would seek to protect its suppliers, dealers and employees while maintaining customers' trust as it navigated the uncertainty created by the tariffs. Ford said it was working with suppliers to assess their exposure and potentially reconfigure processes and sourcing.
In its letter, Toyota said it understood the "complexity and financial burden some suppliers are facing" and asked suppliers to identify and share mitigation measures. Toyota would work with suppliers "in good faith," it said.
Some Toyota suppliers, including Denso, have not given earnings forecasts for the coming year, citing uncertainty.
Julie Boote, an analyst at research firm Pelham Smithers Associates, said the trade war posed an "emergency" for Japan's auto industry that would hasten consolidation.
"In order to survive, these automakers will have to work together," she said.
Squeezed on cost
Japanese manufacturers traditionally put pressure on smaller suppliers to lower prices, said Sayuri Shirai, a former Bank of Japan board member who is now a professor at Keio University.
If the tariffs remain in place in the longer term, it would spell more damage for regional economies hollowed out by demographic decline, she said. The risks for Japan are already clear. The economy shrank in the first quarter, and Tokyo has compiled emergency economic measures to ease the pain of tariffs.
"Automobile exports are just too important to Japan for a 25% tariff to stay in place," said David Boling, a former U.S. trade official who is now a director at consulting firm Eurasia Group.
Boling said the U.S. is unlikely to go below the 10% it agreed to with Britain.
Trump introduced a 25% tariff on automobiles and later a 24% tariff on all Japanese goods. The latter was slashed to 10% for 90 days, which runs out in July. Akazawa, the trade envoy, on Tuesday said Japan was sticking to its guns and wanted tariffs eliminated. A White House spokesperson declined to comment on the negotiations.
A staff member works next to the parts for large LCD panels inside a factory at Kyowa Industrial in Takasaki, Gunma Prefecture, in April. |
Reuters
A U.S. State Department spokesperson said the Trump administration wanted trading partners to align with U.S. efforts to achieve "fairness and balance in our trading relationships and protect U.S. economic and national security."
Two senior Japanese officials said Japan's auto industry was increasingly looking like a laggard and needed to use the tariffs as an opportunity to implement sweeping changes to catch up with EV rivals.
In a statement, the trade ministry said that regardless of U.S. tariffs, Japan's auto industry needed to respond to significant changes in the competitive environment.
Japan's top auto suppliers, called Tier 1, procure parts from Tier 2 suppliers, and so on down the chain. At the bottom are firms that can be little more than neighborhood workshops grinding out a single part. Government officials have previously urged smaller companies to innovate and consolidate, to gain scale.
At regional lender Ashikaga Bank, an automotive industry team supports some 200 companies, around 80% of which are Tier 2 or lower suppliers. A member of the team not authorized to speak publicly said they worried tariffs would lead to higher vehicle prices and a decline in Japanese car sales in the U.S., hitting the bank's clients.
Shinichi Iizuka, president of Toa Kogyo, a suspension-maker in Subaru's hometown of Ota, Gunma Precture, near Takasaki, said the tariff burden will likely be shared by consumers, car dealers, automakers and suppliers.
Some 70% of Subaru's car sales are in the U.S., where it relies on both local manufacturing and imports. On Monday, Subaru said it would raise prices on several U.S. models.
Subaru Chief Financial Officer Shinsuke Toda said this month the automaker was willing to talk with suppliers about sharing their burden, adding the situation remained unclear.
It's personal
Suzuki's drive to diversify Kyowa Industrial into medical devices mirrors the pivot made by her father during the 1980s trade friction, when Kyowa ditched mass production of less-profitable auto parts to focus on higher-margin prototypes and racing-engine components. Suzuki took over in 2000 and her father died in 2013.
Before Trump's tariffs, Suzuki had planned to build a U.S. track record in sales of medical equipment to smooth entry into other markets. With the advent of the U.S. trade barriers, she said her team considered moving production to the U.S., where costs are high, or shifting the sales focus to Asia.
Hiroko Suzuki, president of Kyowa Industrial, inside her company's factory in Takasaki, Gunma Prefecture, in April |
Reuters
Given the uncertainty around Trump's announcements, Kyowa is in talks with potential distributors in Singapore and Hong Kong, Suzuki said.
Around 70% of Kyowa's business still comes from automakers, while makers of chip equipment and Japan's space program contribute to the remainder. It supplies most Japanese carmakers, General Motors and parts for Formula One race cars.
Annual sales are a modest ¥2 billion ($14 million). Still, Kyowa is larger than three-quarters of the roughly 68,000 companies that make up Japan's auto-supply chain, according to research firm Teikoku Databank.
For Suzuki, trade friction is also personal, given her deep affection for the U.S. She grew up listening to rock music on U.S. armed forces radio, learned English and went to university in America. She remembers seeing Aerosmith live at their first concert in Japan.
"Japan and America have a long history of friendship. I hope they can find a solution," she said.