Japanese manufacturers less confident due to Trump tariff action
TOKYO, May 21 (Reuters) - Japanese manufacturers were less confident about business conditions in May compared with April and they expect sentiment to weaken over the next three months as changing U.S. tariff action saps optimism, a Reuters Tankan poll showed.
The subdued mood illustrates the challenge policymakers face after the economy shrank in the January-March quarter, with recovery under threat from U.S. President Donald Trump's trade policy involving the imposition and suspension of steep tariffs.
In the monthly poll, which tracks the Bank of Japan's quarterly business survey, the manufacturers' business sentiment index slipped to plus 8 in May from plus 9 in April.
Manufacturers also said sentiment is likely to weaken to plus 7 over the coming three months.
Still, the figures remain in positive territory, indicating optimists outnumber pessimists about business conditions.
The Reuters poll surveyed 504 major non-financial companies of which 224 responded on condition of anonymity. Issues raised included rising prices and Chinese economic stagnation.
The poll was conducted from May 7-16, after Japan held a second round of tariff talks with the United States. Japan wants the U.S. to fully remove tariffs on its goods, including a 25% duty on automobiles and auto parts.
"Uncertainty over the outlook, including the U.S. tariffs, persists," a manager at an electronics machinery maker wrote in the survey.
"Business conditions are not good due to the delay and freezing of capital investment in Japan caused by the U.S. trade policies," said a manager at a steelmaker.
Still, sentiment in the transport sector jumped to its highest level since December 2023, with one manager saying their business had experienced an increase in vehicle production volume.
In the near term, firms in the transport and metal products said sentiment is likely to worsen due to tariff uncertainty, accelerating inflation and China's weakening economy.
For the service sector, the business sentiment index stood at plus 30 in May, unchanged from April. Companies expect sentiment to weaken to plus 28 in the three months ahead.
Rising labour and raw material costs weighed on confidence, said a manager at a transportation firm, whereas some managers found support from inbound tourism.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sky News
44 minutes ago
- Sky News
The big problem facing UK as deadline to finalise US trade deal looms
When push comes to shove, the question of whether British industry faces crippling tariffs on exports to the US or enjoys a unique opportunity to grow may come back to three seemingly random words: "melted and poured". To see why, let's begin by recapping where we are at present in the soap opera of US trade policy. Donald Trump has just doubled the extra tariffs charged on imports of steel and aluminium into the US from 25% to 50%. In essence, this would turn a painfully high tariff into something closer to an insurmountable economic wall (remember during the Cold War, the Iron Curtain equated to an effective tariff rate of just under 50%). Anyway, the good news for UK steel producers is that they have been spared the 50% rate and will, for the time being, only have to pay the 25% rate. But there is a sting in the tail: that stay of execution will only last until 9 July - on the basis of President Trump's most recent pronouncements. 1:00 For anyone following these events from the corner of their eyes, this might all sound a little odd. After all, didn't Sir Keir Starmer announce only a few weeks ago that British steel and aluminium makers would be able to enjoy not 25% but 0% tariffs with America, thanks to his bold new trade agreement with the US? Well, yes. But the prime minister wasn't being entirely clear about what that meant in practice. Because the reality is that every trade agreement works more or less as follows: politicians negotiate a "heads of terms" agreement - a vague set of principles and red lines. There then follows a period of horse-trading and negotiation to nail down the actual details and turn it into a black and white piece of law. In this case, when the PM and president made their big announcement 28 days ago, they had only agreed on the "heads of terms". The small print was yet to be completed. Right now, we are still in the horse-trading phase. Negotiators from the UK and the US are meeting routinely to try and nail down the small print. And that process is taking longer than many had expected. To see why, it's worth drilling a little bit into the details. The trade deal committed to allowing some cars to pass into the US at a 10% rate and to protecting some pharmaceutical trade, as well as allowing some steel and aluminium into the US at a zero tariff rate. When it comes to cars, there are some nuances about which kind of cars the deal covers. Something similar goes for pharmaceuticals. Things get even knottier when you drill into the detail on steel. 2:13 You see, one of the things the White House is nervous about is the prospect that Britain might become a kind of assembly point for steel from other countries around the world - that you could just ship some steel to Britain, get it pressed or rolled or worked over and then sent across to the US with those 0% tariffs. So the US negotiators are insisting that only steel that is "melted and poured" in the UK (in other words, smelted in a furnace) is covered by the trade deal. That's fine for some producers but not for others. One of Britain's biggest steel exporters is Tata Steel, which makes a lot of steel that gets turned into tin cans you find on American supermarket shelves (not to mention piping used by the oil trade). Up until recently, that steel was indeed "melted and poured" from the blast furnaces at Port Talbot. But Tata shut down those blast furnaces last year, intending to replace them with cleaner electric arc furnaces. And in the intervening period, it's importing raw steel instead from the Netherlands and India and then running it through its mills. Or consider the situation at British Steel. There in Scunthorpe they are melting and pouring the steel from iron made in their blast furnaces - but now ponder this. While the company has been semi-nationalised by the government, it is still technically a Chinese business, owned by Jingye. In other words, its steel might technically count as benefiting China - which is something the White House is even more sensitive about. 👉 Tap here to follow Politics at Jack and Anne's wherever you get your podcasts 👈 You see how this is all suddenly becoming a bit more complicated than it might at first have looked? This helps to explain why the negotiations are taking longer than expected. But this brings us to the big problem. The White House has indicated that Britain will only be spared that 50% tariff rate provided the trade deal is finalised by 9 July. That gives the negotiators another month and a bit. That might sound like a lot, but now consider that that would be one of the fastest announcement-to-completion rates ever achieved in any trade negotiations in modern history. There's no guarantee Britain will actually get this deal done in time for that deadline - though insiders tell me they think they could be able to finalise it in a piecemeal fashion: the cars one week, steel another, pharmaceuticals another. Either way, the heat is on. Just when you thought Britain was in the safe zone, it stands on the edge of jeopardy all over again.
Reuters
an hour ago
- Reuters
US State Department's planned layoffs may violate court order, judge says
June 4 (Reuters) - A federal judge in California on Wednesday said her recent ruling barring President Donald Trump's administration from laying off tens of thousands of federal employees likely blocks the U.S. State Department's reorganization plan that includes 2,000 job cuts. U.S. District Judge Susan Illston in San Francisco during a virtual meeting in a lawsuit by unions, nonprofits and municipalities said she was concerned that the State Department is flouting her May 22 order that broadly blocked government-wide mass layoffs. Illston temporarily blocked about 20 agencies, including the State Department, from carrying out plans to downsize and restructure federal agencies at Trump's direction. But the department told Congress last week that it still planned to notify about 2,000 employees this month that they were being laid off and would reorganize or eliminate more than 300 bureaus and offices. 'At this point there are some semantics being bandied about, but it appears to me that what is being implemented at the State Department now is covered by the injunction,' said Illston, an appointee of President Bill Clinton, a Democrat. Illston ordered both sides to file briefs on the matter next week and said she would hold a hearing by June 13, the earliest date that State can issue layoff notices after it submitted its plan to Congress. In her May ruling, Illston said the White House cannot order the restructuring of federal agencies without authorization from Congress. The Trump administration has asked the U.S. Supreme Court to pause Illston's decision while it appeals, after a San Francisco-based federal appeals court refused to permit the pause. Illston's ruling was the broadest of its kind against the government overhaul that was spearheaded by Trump ally Elon Musk, the world's richest person and CEO of electric vehicle maker Tesla. Musk last week said he was ending his stint with the administration, raising questions about the future of his Department of Government Efficiency. During Wednesday's 30-minute meeting, U.S. Department of Justice lawyer Andrew Bernie argued that the State Department's reorganization plan predated a February executive order and subsequent White House memo directing mass layoffs, placing it outside the scope of Illston's decision. 'We of course recognize and take with the utmost seriousness our obligation to comply with the injunction, and we are complying,' Bernie said, adding that 17 federal agencies have halted planned layoffs. But Danielle Leonard, a lawyer for the plaintiffs, countered that State Department documents and statements regarding the planned layoffs specifically reference orders from the White House. 'We've heard some things from Mr. Bernie today, but we haven't seen anything sworn under penalty of perjury saying this was … independently done,' she said. Illston had convened Wednesday's meeting after the plaintiffs in a filing late Tuesday accused the State Department and the U.S. Department of Housing and Urban Development of not complying with her decision. They said that HUD had fired about 80 employees who had not completed a probationary period, which Bernie on Wednesday confirmed. But he said that agencies have broad latitude to fire probationary workers, and those terminations were not the same as the mass layoffs of tenured employees that were blocked by Illston. Probationary workers typically have less than a year or two in their current roles, though some are longtime federal employees in new positions. Illston said it was not clear to her whether the firings at HUD were covered by her injunction.
Reuters
an hour ago
- Reuters
Trump tax bill would increase number of uninsured by 11 million, CBO says
June 4 (Reuters) - The nonpartisan Congressional Budget Office on Wednesday projected that President Donald Trump's tax-cut bill, as passed by the U.S. House of Representatives, would increase the number of uninsured by 10.9 million in ten years. Another 5.1 million people would lose access to health insurance over that period under current law, the CBO said.
