Tariff Woes and Chinese Rivals Cripple Japan’s U.S. Auto Exports

Japan’s exports to the U.S. fell for the fifth consecutive month in August 2025, declining 13.8% compared to the same period in the previous year, according to data released by the Finance Ministry. The drop reflects continued pressure on Japan’s auto exports, which have been adversely affected by U.S. tariffs imposed by President Donald Trump. The decline in August worsened from a 10.1% drop in July, indicating a persistent slowdown in the sector. Overall, Japan’s exports to the world remained largely unchanged, with a slight 0.1% decline, as gains in shipments to Europe and the Middle East offset the decline in U.S. demand.

The tariffs on Japanese automobiles and auto parts have been reduced from 27.5% to 15%, according to a recent executive order by Trump. However, this rate remains significantly higher than the original 2.5% before Trump’s initial trade measures were introduced. Analysts note that the August export data reflects the period before the tariff cut, as the lower rate was announced in July. The continued tariff burden has made Japanese vehicles less competitive in the U.S. market, where production of high-volume models has already shifted to North American plants.

Beyond tariffs, Japanese automakers face growing challenges from Chinese competition. China, the world’s largest car producer and exporter, has made significant inroads into markets traditionally dominated by Japanese brands, including Southeast Asia and Australia. A 2025 report by PwC showed the market share of Japanese automakers in ASEAN-6 countries—Indonesia, Malaysia, Thailand, the Philippines, Vietnam, and Singapore—fell from 68.2% in 2023 to 63.9% in 2024. Chinese automakers, particularly in the electric vehicle (EV) segment, are increasingly capturing market share with lower prices and advanced manufacturing capabilities.

Domestic economic factors also weigh on Japan’s auto sector. High inflation and weak consumer spending have dampened domestic demand, compounding the challenges posed by international competition. Nissan, in particular, is under pressure as it plans to close seven of its 17 plants by fiscal 2027 and reduce its global workforce by approximately 15% as part of a restructuring strategy. While Toyota maintains a stronger position due to its global scale and diversified production footprint, smaller automakers like Subaru and Mazda are more vulnerable. These companies, however, may benefit from closer ties with Toyota, including joint ventures and co-developed electric vehicles.

The recent trade agreement between the U.S. and Japan offers some clarity for Japanese automakers, allowing them to better plan for pricing and cost structures. However, the tariff reduction does not fully restore competitiveness, and further uncertainty remains regarding potential tariffs on vehicles from other countries such as South Korea or Mexico. Analysts suggest that while the U.S. trade deal provides a degree of stability, the long-term competitiveness of Japanese automakers will depend on how they respond to the evolving global landscape, including the rise of Chinese EVs and shifts in consumer demand.