The trade agreement that was struck between Japan and the US has sparked some unease with automakers. According to this agreement, Japan will be able to lower some of the tariffs on the Japanese auto imports. This will potentially undermine the competitiveness of the US Manufacturers. Key areas of concern in this matter include the impact that it will have on the industry within the United States. The tariff disparities does not do anything to remedy the situation, as it creates an uneven playing field.
Overall perceptions of this trade agreement
A group representing General Motors GM.N Ford F.N and Chrysler-parent Stellantis STLAM.MI on Tuesday raised concerns about a trade deal that could cut tariffs on auto imports from Japan to 15% while leaving tariffs on imports from Canada and Mexico at 25%.
Matt Blunt, who heads the American Automotive Policy Council that represents the Detroit Three automakers, said they were still reviewing the agreement but “any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers.”
The Detroit Three refers to the three largest automotive manufacturers within the United States and includes GM (General Motors, STLA (Stellantis), formerly known as Fiat Chrysler, as well as F (Ford Motor Company). All three have production facilities based within the Detroit area. Overall performance by all three of these have an impact on the economy of the city.
The effect on Japan and the rest of the world
Trump has threatened to hike tariffs on Mexico to 30% and Canada to 35% on 1 August. White House spokesman Kush Desai defended the deal, calling it “a historic win for American automakers by putting an end to Japan’s unfair auto trade barriers for American-made cars.” Political aide Kush Desai has been serving as the White House deputy press secretary under the second Trump administration. Desai assumed office during the start of 2025 and currently served with Anna Kelly.
GM said Tuesday its second-quarter earnings took a $1.1-billion hit from tariffs and expects the impact to worsen in the third quarter. Stellantis said Monday it expects more impact from U.S. tariffs on vehicles and auto part imports in the second half of 2025, reporting Trump’s tariffs had cost it 300 million euros ($352 million) so far as the company reduced vehicle shipments and cut some production to adjust manufacturing levels.
Long-term implications on the automotive industry
In May, AAPC criticized Trump’s announced trade deal with Britain, saying it would harm the U.S. auto sector. British carmakers will be given a quota of 100,000 cars a year that can be sent to the United States at a 10% tariff rate, almost the total Britain exported last year.
“This hurts American automakers, suppliers, and auto workers,”
AAPC said. Trump in April softened the blow of his auto tariffs by easing the impact of duties on parts and materials, but left in place 25% tariffs on imported vehicles. He also extended a duty-free exemption for North American parts that comply with the U.S.-Mexico-Canada trade agreement rules of origin.
As with anything else, these types of announcements do have an effect on everybody. Market reactions also indicated such, with a surge in the shares of Japanese automakers such as Honda and Toyota. This was indicative of investor confidence in the agreement. In contrast to all of this, fears still persist with US automakers that this trade agreement will provide a competitive edge within the US market to Japanese manufacturers. Especially since the local manufacturers face their own set of high costs as well as tariff burdens on some of their own products. This is all a clear indication of the ongoing tensions that revolve around the trade relations between these two countries.
GCN.com/REUTERS.