Japan considers ‘options’ as US auto tariff shakes economy

TOKYO: Japan’s Prime Minister Shigeru Ishiba has signalled that his government will consider all possible measures in response to the US decision to impose a 25 per cent tariff on imported vehicles.

The announcement, made by US President Donald Trump, is part of an ongoing global trade war that has escalated since Trump returned to office earlier this year.

Speaking in parliament, Ishiba questioned the logic behind Washington’s blanket tariffs on all countries, including Japan. “Japan is one of the largest investors in the United States, so it’s hard to see why the same tariff rates are applied to all nations,” he said, referring to Japan’s significant economic contributions to the US. “This is a point we’ve raised and will continue to address.”

He added that Tokyo would evaluate what course of action would best serve the nation’s interests. “All options are on the table as we look for the most effective response,” Ishiba said, though he did not provide specifics on what measures might be considered.

The new US tariff is expected to have a significant impact on Japan’s economy, which heavily relies on car exports to the US. Automobiles accounted for 28.3 per cent of Japan’s total exports to the US in 2024, making it the largest category of exports, according to the Ministry of Finance. The auto industry itself represents about 3 per cent of Japan’s gross domestic product (GDP) and has been a key driver of recent wage increases in the country, as companies shared their overseas profits with workers.

The impact of the tariff was quickly felt in the financial markets. Shares in major Japanese car manufacturers dropped sharply on Thursday following the news, according to Reuters.

Takahide Kiuchi, an economist at the Nomura Research Institute, warned that the 25 per cent tariff could reduce Japan’s GDP by approximately 0.2 per cent. “This move by Trump could immediately trigger a downturn in Japan’s economy,” Kiuchi said.

Japan’s government is now under pressure to navigate this challenge while balancing its economic interests and its close trade relationship with the US.

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