Trump's 'massive' deal with Japan is giving US automakers heartburn
Those losses will be tougher to swallow if other major trading partners succeed in negotiating better tariff rates for their own automakers. Reuters reported Wednesday that stocks in Japanese car companies Toyota and Honda soared on the news of the deal, but so did shares of South Korean and European carmakers, as hopes rise that their leaders could strike similar deals.
Trump's auto tariffs have been a sticking point in trade negotiations with the EU for months, with Germany vocally pushing the 27-member bloc to make major concessions to Trump in hopes of winning a reprieve for its large auto manufacturing sector.
'The costs for our companies are already in the billions — and the sum is growing every day,' said Hildegard Müller, president of VDA, the German automobile association, which represents companies such as Volkswagen, BMW and Mercedes. 'The damage to the previously functioning supply chains is enormous and must not be allowed to increase any further.'
German auto companies are reporting double-digit declines in exports to the U.S. in April and May, and they aren't the only ones. Volvo, the Swedish car company, has had to pause sales of some of its cars in the U.S.
South Korean car companies Hyundai and Kia will announce their second quarter financial results later this week and both companies are projecting significant losses from the tariffs, as well. Auto exports from South Korea to the U.S. have exploded over the past 20 years, from $8.7 billion in 2005 to $37.3 billion in 2024, according to data collected by the Census Bureau.
As with Japan and the EU, the duties have been a focal point of trade talks with the Trump administration, which has grown frustrated by the lack of progress. Trump sent a letter to new South Korean President Lee Jae-Myung on July 7 threatening a 25 percent tariff on all its exports to the U.S. — a sign of dissatisfaction with the state of the talks. (He sent a nearly identical letter to Japan's prime minister the same day.)
After imposing the auto tariffs this spring, the administration assured American automakers that they would not become a bargaining chip in other trade negotiations, a person familiar with discussions between the administration and Detroit's 'Big Three' auto companies, granted anonymity because of the sensitive nature of the talks, told POLITICO at the time. The president sought to cast the UK deal, which reduced duties on auto and auto parts to 10 percent for the first 100,000 cars entering the U.S., as an exception.
'I won't do that deal with cars' for other countries, Trump said when announcing the terms of negotiation on May 8. The British auto brand Rolls-Royce is 'a very special car and it's a very limited number, too. It's not one of the monster car companies that makes millions of cars,' he noted, although some British brands like Land Rover compete with American SUVs.
A White House official, granted anonymity to discuss the trade talks, struck a similar note on Wednesday, downplaying the prospect that Trump will agree to lower the car tariffs for any more countries. 'It's a negotiation,' the person said, pointing to the $550 billion investment Japanese businesses pledged as a sign that the country had made an unparalleled offer.
In Japan, embattled Prime Minister Shigeru Ishiba celebrated the agreement, saying it was focused on 'prioritizing investment over tariffs.'
But others were less enthusiastic about the outcome, given the double-digit tariff rate still hitting Japanese goods.
'If 15 percent is applied to autos and auto parts, Japan did not get what it was aiming for,' said former Japanese Vice Minister Tatsuya Terazawa.
Ari Hawkins contributed to this report.
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