U.S. car companies are protesting President Donald Trump’s new trade deal with Japan, saying it gives that country’s automakers an unfair advantage. The deal calls for a 15% tariff on Japanese-made vehicles, far less than the levies American companies have to pay on imported steel, aluminum and other parts to manufacture vehicles domestically.
Taxing trade
A new trade deal imposes a 15% tariff on cars and trucks imported from Japan. U.S. automakers pay tariffs as high as 50% on materials used to make American cars.
“Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American-built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers,” Matt Blunt, president of the American Automotive Policy Council, told Car and Driver. The council represents Ford, General Motors and Stellantis.
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Trump: ‘Largest Deal ever’
Trump announced the agreement with Japan on social media. He said the United States would charge a 15% tariff on all goods imported from Japan, significantly less than the 25% levy he had threatened to impose on Friday, Aug. 1.
He called the agreement “perhaps the largest Deal ever made.”
“Japan will invest, at my direction, $550 billion dollars into the United States, which will receive 90% of the profits,” Trump wrote. “This deal will create hundreds of thousands of jobs – there has never been anything like it.”
Trump also announced new 19% tariffs on goods imported from Indonesia and the Philippines.
Japan’s Prime Minister, Shigeru Ishiba, reportedly said he is still reviewing the agreement. It remains unclear how the $550 billion investment fund would work or where the money would come from. The White House said Trump would direct investments into energy production, semiconductor manufacturing and research, pharmaceutical manufacturing and commercial and defense shipbuilding.
The United States imported about $148 billion in Japanese goods while exporting goods valued at $79.7 billion last year, according to the U.S. Trade Representative.
The White House said Japan agreed to boost purchases of U.S.-grown rice by 75% and to buy $8 billion in corn, soybeans, fertilizer, bioethanol and sustainable aviation fuel, among other products.
Price increases muted
The U.S. auto industry says the deal will make Japanese vehicles more attractive to American consumers, hurting sales of domestically produced cars and trucks.
The United States already charged a 2.5% tariff on Japanese vehicles, and the deal that Trump announced adds another 12.5% – meaning the price increases seen at car dealers will be somewhat muted.
American car makers face tariffs of 50% on imported steel and aluminum and 25% on parts and vehicles for which the assembly is begun in other countries but completed in the United States. The U.S. companies said it will become less expensive to import Japanese cars than to source the materials needed in U.S. automotive plants.
However, Trump said Japan has agreed to boost imports of U.S. vehicles, which are rare in the Asian country. Vehicles made in the United States, South Korea and Europe combined have a 6% market share in Japan.
The U.S. automotive industry is skeptical.
“I’d be very surprised if we see any meaningful market penetration in Japan,” Blunt, the trade group’s president, told PBS.
Japan, Blunt said, is a “tough nut to crack.”
