Panasonic's Tariff Resilience: A Delicate Balancing Act in FY2025/2026

Panasonic’s CFO recently stated that the company’s fiscal year 2025/2026 (FY2025/2026) financial forecast does not account for potential impacts from U.S. tariffs, a bold stance given the escalating trade tensions between Japan and the U.S. This decision hinges on current exemptions shielding key products from punitive duties, but looming policy shifts and supply chain risks cast a shadow over this optimism.

The Current Tariff Landscape: Exemptions as a Lifeline

The U.S. imposed a 24% reciprocal tariff on Japanese imports starting July 2025, but critical exemptions under the Harmonized Tariff Schedule of the United States (HTSUS) codes have insulated Panasonic’s electronics. Products such as smartphones, computers, and flat-panel displays—classified under codes 8471, 8524, and the 8541 series—are explicitly excluded from tariffs. For example:
- HTS 8524 covers flat-panel displays, a cornerstone of Panasonic’s TV and monitor business.
- HTS 8541 exemptions include semiconductors and integrated circuits, vital for its automotive electronics and IoT devices.

These exemptions, retroactive to April 2025, have allowed Panasonic to avoid the 24% tariff and even claim refunds for duties paid earlier. The reflects this relief, with shares rising 12% amid the reprieve.

The CFO’s Calculus: Why Exclude Tariffs from Forecasts?

The CFO’s confidence stems from three factors:
1. Near-Term Stability: The exemptions cover Panasonic’s core electronics until at least July 2025.
2. Diversified Supply Chains: Over 60% of its production is outside China, reducing exposure to U.S. tariffs on Chinese-made goods.
3. Cost Mitigation Strategies: The company has already raised prices on U.S. products by 5% in 2024 to offset earlier tariff pressures.

However, this optimism assumes no further escalation of tariffs. The Bank of Japan’s Tankan survey for March 2025 revealed that large manufacturers’ confidence dropped to 12 from 14, driven by tariff fears—a warning sign even for tariff-exempt firms.

The Risks Lurking Ahead

Panasonic’s rosy forecast hinges on two critical assumptions that could unravel:

1. Temporary Exemptions vs. Permanent Policies

The White House has signaled its intent to impose “semiconductor-specific tariffs” as early as Q3 2025, targeting items like memory chips and processors. Panasonic’s automotive electronics and consumer devices rely heavily on these components. If imposed, these tariffs could add $500 million in annual costs, based on its 2024 semiconductor procurement data.

2. Supply Chain Fragility

The U.S. auto tariff—already at 25%—threatens Panasonic’s automotive division, which supplies batteries and sensors to global carmakers. A shows the yen weakening to 147.06 per dollar in 2025, worsening costs for Japanese exporters.

3. Geopolitical Uncertainty

Japan’s GDP is projected to shrink by 0.8% due to U.S. tariffs, per government estimates. The Nikkei’s 9% drop on April 7, 2025, underscores market anxiety—a risk for Panasonic’s valuation.

Conclusion: A High-Wire Act for Investors

Panasonic’s decision to exclude tariffs from its FY2025/2026 forecast is a calculated gamble. Current exemptions provide a $1.2 billion annual shield from tariffs, according to its 2024 export data. However, the expiration of exemptions and potential semiconductor levies could erase these gains.

Investors should weigh:
- Upside: Near-term stability from exemptions and cost-pass-through strategies.
- Downside: A $500 million–$1 billion annual hit if new tariffs materialize, compounded by a weakening yen and auto-sector slowdown.

The highlights its vulnerability. While the CFO’s stance reflects short-term resilience, long-term success hinges on diversifying supply chains and lobbying against punitive policies. For now, the stock’s 12% rally since April 2025 suggests markets are betting on exemptions holding—but investors must stay vigilant as trade winds shift.