Japan navigates US pressure and auto export dependence amid trade talks

Japanese Prime Minister Shigeru Ishiba has labeled Donald Trump's tariffs a "national crisis." While the first round of bilateral trade talks concluded without a clear breakthrough, press reports suggest Japan and the US are reportedly close to signing a deal.

While the proposed 24% reciprocal tariff on Japanese imports has been temporarily suspended, Japan remains subject to a baseline tariff of 10% as well as specific duties of 25% on automobiles, auto parts, steel, and aluminum.

To illustrate Japan's trade vulnerabilities, we’ve visualized the structure of its 2024 exports to the US, its largest market. We have highlighted each industry’s share of total Japanese exports and the dependency level on the US -- i.e., the percentage of exports in that category going to the American market.

The automotive sector is clearly the most vulnerable. Motor vehicles alone account for 28.3% of Japan’s total exports to the US, and 33.6% of Japan’s global auto exports are destined for the US market. Auto parts and the machinery sectors are similarly dependent.

More pressure could result if semiconductor-related tariffs are introduced; Japan is one of the global leaders in chipmaking machinery.

Less US-exposed sectors, meanwhile, include iron and steel.

Our second chart tracks the growth rates for overall exports, exports to the US, and auto exports to the US. While March trade data does not yet reflect the full impact of the tariffs, Japan’s overall export growth slowed to a 3.9% year-over-year pace — down from February’s 11.4% increase. (The January and February growth rates might have been driven by orders aimed at getting ahead of the tariffs, as occurred in other countries.)

Transport equipment exports to the US, the category that includes automobiles, rose just 1%. Future data will offer a clearer picture after the 25% auto tariffs took effect on April 3.

Japanese automakers’ exposure to these tariffs varies, as our third chart shows. Honda, Nissan, and Toyota make a large proportion of their vehicles overseas, including at US factories whose output would not face tariffs on finished vehicles. By contrast, Mazda and Mitsubishi have more domestic-centric production.