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Yahoo
2 days ago
- Automotive
- Yahoo
Trump's Tariffs and Japan Deal Could Encourage Toyota To Move Manufacturing Jobs Out of America
In This Article: Over the past few decades, Japan-based automaker Toyota has spent billions of dollars to expand its manufacturing and assembly plants in the United States. Those plants now employ over 64,000 people across North America and have churned out millions of vehicles. For politicians who fetishize blue-collar work, this ought to be tremendous news. Indeed, it also illustrates one of the underappreciated aspects of globalization and free trade: The flow of capital and goods often gets blamed for the outsourcing of American jobs overseas, but it also means the creation of jobs in America that are backed by investments from foreign firms. Now, however, the Trump administration seems to be trying to undo that. With a series of short-sighted tariff maneuvers, the president has effectively told Toyota (and other Japanese carmakers) that it should do more of its manufacturing in Japan and stop trying to create jobs in America. Earlier this week, President Donald Trump announced a new trade deal with Japan that will include a 15 percent tariff on Japanese goods, including imported cars. The details of the deal remain somewhat vague, but that's a significant discount compared to the 25 percent tariff the administration has imposed on cars imported from everywhere else. The reduced tariffs for Japanese cars are significant because of how that provision interacts with the Trump administration's other trade policies that are aimed at making it more expensive to manufacture cars in the United States. The president has imposed a 50 percent tariff on steel and aluminum (both of which are essential for automakers) and has slapped a 25 percent tariff on imported cars and car parts. Those tariffs are already dinging the profits of American carmakers—General Motors reportedly lost more than $1 billion in the second quarter of the year—and auto industry experts say they will raise prices, reduce demand for new cars, and generally make American cars less globally competitive. In short, the Trump administration is offering an incentive to import finished cars from Japan, while making it more expensive to buy the stuff you need to build cars in America. The 15 percent tariff on Japanese imports is "unfair for American automakers," who are facing a 25 percent tariff on auto parts and finished cars imported from Canada and Mexico, David Whiston, an analyst for market research firm Morningstar, told The Washington Post. Matt Blunt, president of the American Automotive Policy Council, has also called it a " bad deal." So far, the White House has shaken off those complaints. Commerce Secretary Howard Lutnick told CNBC on Thursday that tariff complaints from the American auto industry were "just so silly" and repeated the Trump administration's claim that "there's no tariff if you build it in America." Story Continues
Reuters
7 days ago
- Automotive
- Reuters
Breakingviews - Japan trade deal breaks US tariff template
HONG KONG, July 23 (Reuters Breakingviews) - Everything is up for grabs. That's the takeaway from the U.S.-Japan trade pact Donald Trump and Shigeru Ishiba revealed on Wednesday. By setting tariffs on U.S. imports from the Asian country at 15%, including autos, the U.S. president is handing Japan's prime minister a decent win but also beating a big retreat on his flagship "sectoral tariffs". It further complicates Washington's regime of wildly diverging levies. With reports of his resignation swirling after a bruising election result for his coalition at the weekend, Ishiba declared that his country, which shipped $150 billion in Japanese goods to America last year, had secured the best deal among those that have a trade surplus with the United States. That is true, so far. The agreement puts the tariff 10 percentage points lower than the levy Trump had threatened. The UK secured 10%, but it exports more to the U.S. than it imports. The surprise is that Japan's deal breaks Trump's tariff template. He pledged there would be separate levies for autos, pharmaceutical goods, steel and semiconductors. Handing the Asian giant a 15% flat rate on auto exports, which comprise nearly 30% of Japan's U.S. shipments, rather than the 25% sectoral rate, suggests nothing about Trump's tariff regime is set in stone besides the 10% baseline duty he has imposed on all of America's global trading partners. The outlook for Japanese carmakers will further brighten if Trump sets equal or lower tariffs on imports from Canada and Mexico. Take Toyota Motor (7203.T), opens new tab. The world's largest carmaker sold 2.3 million cars in the U.S. last year – 23% of its global total – and produced more than half that amount there. But it also made around 800,000 vehicles in Canada and Mexico. Honda Motor (7267.T), opens new tab and Nissan Motor (7201.T), opens new tab will find it especially painful if auto tariffs on those two countries remain at 25%. South Korea, another big Asian auto exporter, also will now hope to win an exemption. It's enough to justify a relief rally. An 11% jump in the Topix Autos Index (.ITEQP.T), opens new tab led a broader jump in stocks. Meanwhile, the yield on five-year government bonds rose 9 basis points to 1.11%, the highest since April 1. The Bank of Japan (8301.T), opens new tab unsurprisingly struck a more sober tone because, in the end, it is still a blow for the struggling $4 trillion economy: last year, 53% of Japan's exports to the U.S. crossed the Pacific tariff-free, BNP Paribas analyst William Bratton notes. Other sops in the deal look less material and well-designed for Trump to tout to an American public. These include a $550 billion commitment for Japan to invest in the U.S. This is nearly four times the value of Japan's exports to America, but SoftBank (9434.T), opens new tab had already pledged to invest $100 billion stateside over the next four years. Ishiba also clarified that his country's pledge to import U.S. rice would be under its "minimum access", so Japan's powerful lobby of farmers will remain protected. If Ishiba does resign following this deal, he may at least avoid being criticised for playing hardball in tariff negotiations. And foreign leaders will be quietly singing his praises. Follow Una Galani on Linkedin, opens new tab and X, opens new tab.
