Why Japanese Cars Could Win Over U.S. Buyers

One day following the United States securing a trade agreement that introduces a 15% tax on goods coming from Japan, President Donald Trump stated that American businesses would "BOOM." However, initial assessments from automotive analysts suggest a less clear outlook—some specialists argue that Japanese firms might gain an advantage over their competitors at this time.

"I believe the 15% tax on cars coming into the U.S. from Japan is unjust for American car manufacturers, particularly since they face a 25% duty on their products made in Mexico and Canada when sent to the U.S.," wrote David Whiston, an analyst at Morningstar Research, in an email to The Washington Post.

Trump stated on Tuesday that the U.S. has made a "major" agreement with Japan to impose tariffs 15 percent tariffs Regarding Japanese imports—such as cars and car components—the tariff rate will be lower than the 25% he previously warned about this month. In return, Japan will eliminate trade obstacles for American automotive and farm products and commit to investing $550 billion in the United States. This marks another trade deal unveiled by the Trump administration recently, as they work quickly to finalize agreements with numerous nations that have faced potential heavy taxes.

"This agreement will generate hundreds of thousands of jobs — there has never been something comparable," the president posted on his social media platform, Truth Social.

The leading three American car manufacturers—General Motors, Ford, and Stellantis—are not as assured as Trump.

Matt Blunt, who serves as president of the American Automotive Policy Council—a advocacy organization representing the major automobile manufacturers—stated that they are continuing to evaluate the arrangement. However, Blunt, previously a Republican governor of Missouri, mentioned in a release that an accord where Japanese carmakers face reduced tax rates on their shipments compared to what U.S.-based firms encounter when importing components "hurts both American manufacturing and automotive employees."

A White House spokesperson named Kush Desai described the trade agreement primarily as a means to enhance American car manufacturers' entry into the Japanese and Indonesian markets. He also mentioned that additional efforts supported by Trump, including tax reductions and less regulation, would benefit the local automotive sector.

"President Trump has shown more dedication to bringing back the American automobile industry's leadership compared to any previous president, and his administration is collaborating closely with the automotive sector to reach this objective," Desai stated in a release.

After the Trump administration imposed significant tariffs on many trading partners—including key allies like Mexico and Canada—the U.S. automotive sector has been working to adapt. Supply chains cross multiple borders especially in North America, where products from Mexico and Canada face 25% import duties.

Companies operating in the U.S. have experienced the effects. GM announced on Tuesday that tariffs cost it $1.1 billion In the second quarter, Stellantis—which owns brands such as Chrysler, Dodge, Fiat, and Jeep—reported encountering approximately $350 million in additional costs due to tariffs during the first half of the year.

Vehicle costs indicate that car manufacturers have absorbed Many manufacturers are keeping the tariffs at present instead of transferring them to consumers. According to Kelley Blue Book data from June, the price of a new car increased by 1.2 percent compared to the previous year, reaching $48,907. Although this represents the highest monthly rise so far this year, it is still significantly lower than the typical 10-year average increase of 3.9 percent.

Jonathan Smoke, chief economist for Cox Automotive, stated that cars built in the U.S. will experience the smallest additional costs within the present trade system, potentially increasing consumer prices by up to 4 percent, or roughly $2,000. Several models—such as the Toyota Camry and Ford Bronco—are manufactured domestically.

However, numerous vehicles are put together in Mexico and Japan. Cox predicts that buyers will spend an additional 9 percent, or $3,010, on automobiles manufactured in Japan, including certain Toyota models like the Prius and the 4Runner. Cars built in Mexico will result in the greatest expenses for customers—approximately 10 percent or $3,550—as stated by Cox. These consist of the Chevrolet Equinox and the Ford Maverick.

"It appears that Japanese-assembled vehicles receive more favorable treatment compared to those manufactured in North America outside the U.S., although vehicles produced in the U.S. face the lowest additional costs due to tariffs," Smoke stated in an email.

Several other experts concurred that Japanese firms might gain a short-term benefit.

Having this agreement in effect prior to other international car manufacturers providing benefits to Japan, offering a short-term edge regarding expenses, even when contrasted against certain American-made vehicles that incorporate significant amounts of imported manufacturing and components," noted Karl Brauer, senior analyst at iSeeCars, in an email sent to The Washington Post. "Additionally, it enables Japanese automobile companies to strategize about where they will establish upcoming assembly facilities and component suppliers.

Auto Manufacturers for America, which advocates for international car companies in the United States, expressed being "encouraged" by reports of the Japan trade agreement.

"Over the last three decades, international car manufacturers have poured more than $124 billion into their activities within the United States, and the stability offered by this deal enables them to strategize for increased investments, leading to additional manufacturing here and offering cost-effective choices for U.S. customers," stated Jennifer Safavian, president and CEO of Autos Drive America, in a press release.

According to Erik Gordon, a professor at the University of Michigan's Ross School of Business, U.S. businesses could succeed over time. In an email, he mentioned that should North American tariffs remain at 25%, "U.S. companies will shift much of their production and assembly back to the U.S., moving it away from Mexico and Canada."