Tariff loophole benefits foreign rivals, stuns US automakers

Daily Mail​

24-07-2025

America just reached a trade deal with Japan — US automakers are furious. Tuesday night, President Donald Trump announced a deal to slash tariffs on Japanese imports to 15 percent, including vehicles and auto parts.
Under the deal, Japanese-built cars will face lower tariffs than the parts US automakers import to build their own. It's a major retreat from months of threats to impose a punishing 25 percent levy on automakers like Toyota, Honda, Subaru, Mazda, and Nissan. That change is sparking outrage among US car companies. Representatives for the Detroit Big Three — General Motors, Ford, and Chrysler — say the lower tariff rate gives their foreign rivals an unfair edge.
Matt Blunt, head of the American Automotive Policy Council, which represents the three automakers, called the agreement a 'bad deal for US industry and US auto workers,' in a statement to DailyMail.com. He added that automakers are still analyzing the impacts, but criticized 'lower tariff for Japanese imports with virtually no US content than the tariff imposed on North American built vehicles.' The White House had long billed the tariffs as a tool to revive domestic auto manufacturing.
But US-based automakers say the policy is doing the opposite — cutting deep into their profits just as they face pressure from Trump to expand American operations. This week, GM reported a sharp $1.1 billion income decline in the past quarter. The carmaker expects to pay between $4 billion and $5 billion in tariffs this year. Stellantis — the company that operates American brands Jeep, Dodge, Ram, and Chrysler — said it lost $2.68 billion in the first half of 2025 while paying $350 million in US tariffs.
Executives say those costs are hard to avoid, even when most of their production happens on American soil. 'Let me take you through the math: in a $40,000 to $50,000 F-150, 75 to 80 percent of the parts are made in America,' Ford's CEO, Jim Farley, previously said in an interview with CNN, while pointing out that 80 percent of the companies cars are assembles in the US. 'We have to import certain parts. A lot of parts like fasteners, washers, and carpet are just not available. We can't even buy those parts [in the US].'
Meanwhile, the promised manufacturing job boom has yet to materialize. Combining the May and June jobs reports, Americans lost 14,000 manufacturing jobs, even as other sectors added positions. Despite US industry backlash, President Trump said his deal with Japan was a massive win. 'I just signed the largest trade deal in history, I think maybe the largest deal in history, Japan,' Trump said in the East Room of the White House on Tuesday. The President said it would create 'hundreds of thousands of jobs.'
As part of the deal, Japan will buy 100 Boeing planes and hike defense spending with US firms by $3 billion annually. It spent $14 billion on defense prokects with US manufacturing last year. Before the agreement, Japanese companies had worried about the impact of 25 percent levies, saying they threatened higher consumer prices and job losses at US-based factories. Now, they've emerged as clear winners.
On Wall Street, shares of Japanese car brands skyrocketted. Toyota's stock price is up 13 percent in early trading Wednesday. Honda (12 percent), Mazda (17 percent), and Nissan (eight percent) are also benefitting from the change. Even so, car buyers may not see relief. Erin Keating, an analyst at Cox Automotive, said that even the lower tariffs are fueling price hikes. She noted that 'destination charges' — the fees tied to vehicle delivery — have risen since April, when Trump first launched the automotive tariffs.
And car companies are just about to switch over to a fresh lineup of 2026 model year vehicles. Fall-season dealership refreshes are the most popular time for price hikes. Keating also pointed to another reason Japanese brands are better positioned than their US rivals: they still make affordable sedans.