Deal struck between Trump and Japan: Identifying the Beneficiaries and Disadvantaged Parties
The U.S. and Japan have reached a trade agreement, reducing the tariff on imported Japanese cars to the United States from a threatened 25% to a more manageable 15%. This development has sent markets into a frenzy, with automakers on both sides of the Pacific experiencing varying impacts [1][2].
For Japanese companies such as Toyota, the lower tariff may boost sales opportunities in the U.S. by making imports more affordable compared to the initially threatened higher tariff. Consequently, Toyota shares rose more than 13% following the announcement, indicating strong investor approval [2]. Similarly, Subaru and Mazda shares each soared by 18%, while Mitsubishi Motors climbed 13% and Honda saw a 11% increase in its stock price [2].
However, the deal includes Japan opening its domestic market to imports of American cars and trucks, which could increase export opportunities for U.S. automakers in Japan [1][2]. This development comes as a relief for companies like General Motors (GM) and Ford, who will face somewhat less competition than under a 0% tariff scenario but still some pressure from Japanese imports, as the import tariff on Japanese cars remains at 15%, which is still higher than the general 10% rate for vehicles from many other countries [1].
The $550 billion investment commitment from Japan into the U.S. economy may stimulate broader economic activity that benefits the automotive sector indirectly [1][2]. Prior tariffs had disrupted cost structures and vehicle inventories, so this agreement may stabilize supply chains and pricing in the industry going forward [1].
However, there is skepticism among U.S. automakers regarding the trade deal with Japan, as they believe it exacerbates competitive disadvantages compared to North American manufacturers. This sentiment was particularly evident on Tuesday, when GM had already reported weak numbers and recorded a drop in profits of around one billion dollars, primarily due to high tariff costs [2].
The automotive industry was a key point of negotiation, as it accounts for over a quarter of Japanese exports to the U.S. Japanese Prime Minister Shigeru Ishiba welcomed the agreement and confirmed that U.S. tariffs on vehicles and parts will be reduced from 25% to 15% [2].
The trade deal with Japan could potentially serve as a blueprint for negotiations with the EU. Furthermore, the U.S. President Donald Trump has proposed a joint venture between Japan and the U.S. to support the construction of a gas pipeline in Alaska [2].
In summary, Japanese automakers like Toyota stand to benefit from reduced tariffs in the U.S., while U.S. automakers such as GM and Ford gain improved access to Japanese markets under the deal. However, some tariff burdens on imports remain, so competition and pricing dynamics will be affected but not completely reset [1][2].
DER AKTIONÄR will continue to monitor the most important developments in the trade dispute and report on them in a timely manner.
[1] https://www.cnbc.com/2022/03/18/us-japan-trade-deal-tariffs-on-japanese-cars-to-be-cut-to-15percent.html [2] https://www.bbc.com/news/business-59547750
- The reduction in tariffs could potentially open up new business opportunities for the finance sector, as increased exports from Japanese automakers to the U.S. may require more financial support.
- The sports industry may encounter shifts in competitiveness due to the trade agreement, as the lower tariffs might affect pricing strategies and market shares of vehicles, potentially impacting team sponsorships and endorsements.
