Tesla automobiles are lined up at a car storage yard at an industrial port, on the day U.S. President Donald Trump struck a commerce take care of Japan that lowers tariffs on auto imports, in Yokohama, close to Tokyo, Japan, July 23, 2025.
Kim Kyung-hoon | Reuters
Japanese automakers could have sidestepped crushing U.S. tariffs, however the reprieve is providing little consolation as Chinese language automakers erode their long-held world edge, difficult by persistent structural challenges at residence.
On July 22, U.S. President Donald Trump introduced that auto tariffs on Japan-made car imports to the U.S. have been lowered to fifteen% from the present 25%.
Nevertheless, the sunshine is not on the finish of the tunnel simply but, trade specialists cautioned.
“The commerce deal struck with the U.S. is actually a aid in that it affords some certainty that U.S. tariffs on Japan-made vehicles will not rise to punitive ranges,” stated Stefan Angrick, head of Japan and Frontier market economics at Moody’s Analytics.
“However I might hesitate to name it excellent news. A 15% U.S. import tariff remains to be considerably greater than the place Japan began. And a 15% tariff is actually the next price than most had anticipated.”
The bigger problem, analysts say, comes from China’s meteoric rise within the world automotive trade. As soon as an vital development marketplace for Japanese manufacturers, China has reworked right into a dominant competitor.
A key problem for Japanese producers is the intensifying competitors from China, Angrick stated. China’s push into superior manufacturing has reworked it right into a formidable competitor simply as home demand for Japan-made vehicles started to melt, he added.
Seconding his view is Karl Brauer, government analyst at iSeeCars, who famous that lower-cost Chinese language automobiles stay the “single largest risk” to Japan’s auto trade and financial outlook.
China is the world’s largest automotive producer and exporter, notably of electric vehicles. The nation’s rising dominance in essential parts and EV innovation is increasingly squeezing foreign automakers.
Chinese language automakers have additionally been making important inroads into Southeast Asia — a region long dominated by Japanese brands like Toyota, Honda, and Nissan — making it an uphill battle for Japanese automakers to keep up their once-unassailable world market share.
In accordance with a 2025 report by PwC, the market share of Japanese auto producers in Indonesia, Malaysia, Thailand, the Philippines, Vietnam and Singapore, generally known as ASEAN-6, fell from 68.2% in 2023 to 63.9% in 2024.
“[China autos] are increasing into markets the place Japanese companies used to have a robust foothold. Thailand is one instance,” stated the Moody’s Analytics’ skilled.
Past Southeast Asia, Japan’s second-largest car export market can be being contested by China: Australia.
A recent study commissioned by the Australian Automotive Dealer Association predicts that China is poised to surpass different nations as Australia’s main supply of car imports inside the subsequent decade.
By 2035, 43% of all imported automobiles in Australia are anticipated to be manufactured in China, up from the anticipated 17% in 2025, the report instructed. Against this, Japanese imports are anticipated to fall from 32% in 2025 to 22% by 2035.
Home challenges?
Moreover exterior competitors, Japan’s automotive sector is contending with home financial challenges, together with excessive inflation and weak shopper spending — just like different developed economies.
Whereas giant automakers like Toyota proceed to seek out success domestically, Nissan is very susceptible because of the rising risk from China’s automotive trade, Brauer defined.
Earlier missteps by the administration and planned plant closures are compounding its woes. Nissan plans to close down seven of its 17 vegetation by fiscal 2027 and cut back its global workforce by around 15% as a part of a restructuring plan.
“All in all, the outlook for Japan’s automotive trade could be very difficult,” Moody’s Angrick stated.
Whereas Toyota‘s world scale and diversified manufacturing footprint give it a relative benefit in maneuvering stated challenges, smaller automakers reminiscent of Subaru and Mazda are underneath extra stress, famous Mio Kato, founding father of Lightstream Analysis.
Whereas Subaru and Mazda do face a “considerably greater burden,” they do have a bonus in having sturdy ties to Toyota, stated Kato.
Mazada, for one, shares a joint plant with Toyota, whereas Subaru is teaming up with Toyota to fabricate a co-developed electrical car slated for a 2026 debut.
In the long run, Kato believes that these partnerships might deepen, doubtlessly resulting in a extra formal consolidation underneath Toyota’s umbrella.
“I would not count on [a consolidation] to occur on a short-term timeframe. Nevertheless, it’s actually one thing for them to think about while you begin trying in the direction of the top of the last decade, maybe,” he stated.
Nonetheless, analysts acknowledge that Trump’s finalized tariff price brings at the least one profit: some predictability.
Whereas it’s nonetheless too quickly to totally infer the long-term affect of the brand new commerce settlement between the U.S. and Japan, having a confirmed tariff settlement will enable Japanese automakers to know their pricing and price constructions going ahead, specialists echoed.
Nevertheless, it stays unclear what tariff charges different automakers will face.
“I feel absolutely the case for Japan is now understood comparatively properly, however by way of how their competitiveness shifts, versus say, autos manufactured in Korea and exported or from Mexico and Canada, that might nonetheless affect the revenue outlook for Japanese auto corporations,” Kato stated.