Sorry Mr Trump But Your American Cars Won't Sell In Japan. Here's Why.
President Trump is chuffed about his recent trade deal with Japan calling it the greatest in U.S. history. "I just signed the largest trade deal in history, I think maybe the largest deal in history with Japan," Trump boasted at the White House on Tuesday evening. Japan also agreed to invest $550bn in the U.S. economy although no details were forthcoming as to which industries or sectors would benefit.
Trump shakes hands with Japan's PM Shigeru Ishiba. (Photo by Jim WATSON / AFP) (Photo by JIM ... More WATSON/AFP via Getty Images)
Meanwhile Japan's Prime Minister Shigeru Ishiba welcomed the announcement of the 15% reciprocal tariffs—down from 25%, stressing that it was "the lowest figure to date among countries with trade surpluses with the US'.
Japan's stock market soared at news of 15% trade deal
News of the deal was well-received by the Japanese stock market which saw shares soar with Mazda rising 17%, Toyota swelling by 15%, Mitsubishi up 13%, Honda increasing 11% and Nissan jumping 8%. Mazda, a carmaker who builds the majority of its vehicles in Japan, was particularly concerned about the proposed 25% tariffs.
A quarter of Japan's US exports are from its critical automotive sector, which accounts for almost 3% of its economy. And it's with the auto sector that Trump really seems to have no idea what's really happening.
The truth is two-fold. Firstly, before Trump started threatening Japan with tariffs, American cars entering the Japanese market, including Jeep, Cadillac and Corvette, were charged a zero tariff. Zilch! Japan has not charged tariffs or imports duties on imported cars from the U.S., or Europe for that matter, since the late 1970s. In contrast, America had imposed a 2.5% tariff on Japanese imports.
Corvette sells in small numbers in Japan. (Photo By)
But that's only part of the issue. Trump has continually complained that Japan does not take American cars. He has repeatedly said that the Asian nation is not open to U.S. vehicles. After this major trade deal announcement with Japan, Trump is bloating that the country will now open up to U.S. cars, trucks, rice and other agricultural products.
Hey, buddy, that is not the reality. Japan is, and always has been open and ready to take all the American cars you wish to export. The bottom line is—apart from Jeep, which is the biggest selling American car in Japan, and a smattering of Cadillac and Corvette models, Japanese motorists, for the most part, don't want to buy American cars. Not even Tesla EVs, which do sell in Japan, but are imported from China, so not really seen as American.
The fact is that old impressions die hard. From the 1970s through to the early 21st century, a mixture of U.S. cars were offered in Japan—including Ford, GM, Pontiac and Buick, in addition to Chrysler. But even though some brands delivered more stylish designs or more powerful engines than their Japanese counterparts, most American cars were considered too big for Japanese roads and carparks, and not as fuel-efficient or as reliable as Japanese cars, which were, on average, a little cheaper. Other critical factors that led to several brands exiting Japan, like Ford in 2016, were insufficient product lineups, and a poor dealer network.
So, with all that in mind Mr Trump, to be honest, it does not matter how many American cars you force on the Japanese market, I cannot see how U.S. brands will sell here, no matter what Trump says. Japanese don't want them. It's like trying to force-feed sushi with wasabi to blue collar American families in the Rust Belt—it is a really tough sell.
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