Japanese Automakers Pass on Tariff Costs to US Car Buyers

Japanese automakers have started to raise prices in the US after absorbing the costs of tariffs for a short period. The price hikes are a result of the ongoing trade tensions and tariffs imposed by the US on Japanese automotive imports. The automakers are passing on the costs to US car buyers, affecting the market.

Title: Japanese Automakers Pass US Tariff Costs to American Consumers

Japanese automakers, including Toyota, Honda, Nissan, Hyundai, and Kia, have begun to pass on the costs of US tariffs to American consumers, marking a significant shift in their pricing strategy. This move comes after a period of absorbing tariff expenses to maintain stable retail prices in the US market.

In early August, Toyota's chief financial officer revealed that US tariffs had reduced the company's full-year operating profit by ¥1.4 trillion (approximately US$9.5 billion), a 16% downward revision from ¥3.2 trillion [1]. This was the sharpest tariff-related impact estimate yet from any global automaker. The announcement followed a July 22 decision by US President Donald Trump to lower tariffs on Japanese-made vehicle imports from 25% to 15%, with a similar rollback for South Korean-made vehicles [1].

Asian automakers, including Hyundai, have experienced unprecedented profit erosion in Q2 2025, with Hyundai reporting a 22% drop in net profit due to tariffs [1]. Mitsubishi Motors saw its net profit nearly wiped out, falling from ¥29.5 billion ($201 million) a year earlier to ¥14.4 billion, largely due to tariffs and increased incentive costs [1].

Fitch Ratings warned on August 15 that US auto tariffs continue to weigh heavily on the financial health of Japanese and Korean automakers [1]. While Japan's direct exports to the US are relatively limited, Korean manufacturers are more exposed to the new 15% tariff rate. Both countries remain vulnerable to tariff risks tied to other export hubs, particularly Mexico and Canada, where trade terms are still unsettled [1].

Currency fluctuations have also added to the financial strain. The yen and won both strengthened by roughly 9% against the US dollar in the first half of 2025, diminishing the value of US sales when converted to local currency [1].

The price hikes are a result of the ongoing trade tensions and tariffs imposed by the US on Japanese automotive imports. Japanese automakers, until recently, absorbed the tariffs to keep U.S. retail prices steady. However, with the recent rollback in tariffs, the companies are now passing on the costs to US car buyers [2].

This shift in pricing strategy will likely affect the market dynamics, as consumers may face stricter credit assessments, higher down payments, and less favourable lease options. Captive finance divisions, such as Toyota Financial Services, Honda Finance, Nissan Financial Services, Hyundai Capital, and Kia Finance, will come under pressure to redesign customer touchpoints to offer refinance incentives, loyalty discounts, and lease adjustments to keep buyers engaged [1].

References:
[1] https://finance.yahoo.com/news/us-tariffs-tighten-screws-japanese-155920455.html
[2] https://asia.nikkei.com/business/automobiles/japan-automakers-start-to-pass-on-trump-tariff-costs-to-us-consumers