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In a world rife with tariff chatter, a number of countries and blocs are in the spotlight. Japan is not … unless you explore a 4-page February research briefing from Oxford Economics. The automotive and machinery sectors stand to be most affected. “While shipment to the U.S. accounts for 20% of total Japan exports, Japan only accounts for 5% of total U.S. imports,” writes economist Makoto Tsuchiya. Among other observations, the report notes that even for the most exposed sector, “20% tariffs on Japanese goods will translate into less than a 0.5% rise in U.S. output prices. This uneven power balance presents the U.S. with a chance to use tariffs as a means to gain diplomatic leverage.”
Retaliatory tariffs could target agricultural products, says the briefing. But the interconnectedness of the global economy means Japan could be impacted by other tariffs. “Tariffs on Mexico will be detrimental to Japanese automakers who have a production hub in the country, while those on Taiwan semiconductors could dampen demand for Japanese chip equipment.”
The report comes as new figures from automobile manufacturing associations in each country show that China, driven by companies such as BYD, overtook Japan as the world leader in car exports in 2023. Nikkei Asia says it’s the first time Japan has ceded the No. 1 position since 2016, when Germany was No. 1.
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