The deal will lower tariffs on car imports from Japan to 15% from 25%.
Carmakers Blast Japan Trade Deal
The Wall Street Journal reports Detroit Carmakers Blast Japan Trade Deal, But Their Shares Are Rallying Anyway
Detroit’s automakers blasted the Trump administration’s trade pact with Japan as a “bad deal” for the U.S. car industry Wednesday, but global auto stocks rallied on news of the agreement.
Under the agreement, tariffs on Japanese cars will be lowered to 15% from 25%. Toyota’s shares ended Wednesday trade in Tokyo about 14% higher, its largest single-day percent increase in more than 15 years. Honda closed up more than 11%.
The trade deal with Japan is also giving investors hope that there could be similar reductions on tariffs for vehicles imported from other countries—including trade agreements that would benefit U.S. automakers, which have a significant presence in Canada and Mexico. Shares in GM and Ford Motor were up midday about 6% and 2%, respectively, while Jeep-maker Stellantis jumped 11%.
Even so, Detroit’s car companies weren’t pleased.
“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,” said Matt Blunt, head of the American Automotive Policy Council. The body represents General Motors, Ford Motor and Stellantis.
Japan shipped roughly 1.4 million vehicles to the U.S. last year, the third-largest exporter after Mexico and South Korea. The tariff reduction represents a major win for Japanese automakers, providing them an edge to President Trump’s 25% tariffs on most other car imports from around the world.
Tariffs have already started to take a bite out of automaker profits. On Monday, Stellantis warned investors that its earnings took a hit of around $350 million as a result of Trump’s auto tariffs. A day later, GM said the levies cost it more than $1 billion.
Detroit’s three car companies have much to gain from seeing auto tariffs lowered in other countries because they manufacture some cars and import many auto parts from around the world.
Overall, in 2024, about 3.7 million cars made in Mexico and Canada were imported and sold in the U.S., according to GlobalData, an industry-research firm.
“The Japanese deal at least highlights that some mitigation on 25%…U.S. auto tariffs is possible,” Citi analysts said in a note. But it will arguably make life more difficult for U.S. car companies who still have to pay 25% to import from Canada and Mexico, the note said.
Treasury Secretary Scott Bessent said in an interview with Bloomberg Television that the U.S. agreed to lower Japan’s car import rate to 15% because Japan provided an “innovative financing mechanism” to make a deal happen. Japan is providing equity, credit guarantees, and funding for major projects in the U.S., he said.
Analysts noted the possibility that the deal with Japan could point to some relief in a forthcoming pact between the U.S. and the European Union. But Japanese carmakers will clearly have a competitive advantage for now, they said.
Japan Trade Deal Offers US Automakers Relief, Not New Markets
Bloomberg reports Japan Trade Deal Offers US Automakers Relief, Not New Markets
If only Switzerland would open itself up to US chocolate exports. Oh right, it did. Even so, I’m guessing the master chocolatiers are safe in their Alpine redoubt from an American influx. On a similar note, President Donald Trump’s touted victory in getting Japan to open up to US auto exports as part of Tuesday’s trade deal amounts to very little of substance. It may yet carry a silver lining of sorts for Detroit.
Japan hasn’t levied tariffs on foreign autos for nigh on half a century. There are some formal barriers including specific standards and certification requirements. But the reason Japan doesn’t buy many vehicles from the US is that it mostly doesn’t want the kind of vehicles the US produces.
The best selling model in Japan is the Honda N-Box, a “truly adorable little mini van”, as Car and Driver puts it, that gets upward of 50 miles per gallon and can be had for as little as $12,000, according to the manufacturer’s website. This makes sense, since Japan is characterized by dense urban living, high-quality public transit and gasoline prices that are, on average, roughly 40%, or more than a dollar per gallon, higher than in the US.
US automakers do not, in general, make an adorable little anything. Ford Motor Co. barely even makes cars anymore, outside of the Mustang brand. Along with General Motors Co., it has mostly retreated from international markets to focus on serving the peculiarly robust tastes of its domestic market. There, more than 80% of light-duty vehicle sales are for hefty trucks such as the best-selling Ford F-150 series and SUVs that command a premium, and the market for sedans has been left largely to the likes of Japan’s automakers.
Logic would dictate that if Japan’s car companies are getting a 15% tariff on their exports, then surely Canada and Mexico will ultimately get similar or lower rates, if for no other reason than to take pressure off the US automakers. (As an aside, GM could really use a similar deal for South Korea, too). Therein lies the optimistic interpretation of Trump’s deal, and US auto stocks — along with European counterparts — rallied Wednesday on this modified TACO trade. Logic has been in short supply this year, but hope remains in abundance.
Modified TACO Trade
The markets are happy with the backdown of Trump from 25 percent tariffs to 15 percent tariffs.
But GM and Ford are not happy with Trump’s 25 percent tariffs on Mexico and Canada.
The market expects Trump to back off those tariffs and so do I. But some reshoring efforts are underway.
GM and Ford will either eat those costs or pass them on.
GM Profit Down 35 Percent Due to $1.1 Billion Tariff Hit
On July 22, I commented GM Profit Down 35 Percent Due to $1.1 Billion Tariff Hit
The next quarter will be worse says CEO Mary Barra.
As part of its mitigation plans, GM will bring more production back to the US.
The tariffs are now so onerous that it makes sense to bring production back to the US.
But the bottom line has not changed, GM will have to raise prices or deal with perpetually lower profit, or some combination.
In addition, GM will face higher prices for steel, aluminum, and copper no matter where it produces cars.
US Car Exports Headed towards Zero
The US is building big trucks and cars most of the words does not want.
Other than Tesla, the US has temporarily given up on EVs.
Musk has offended most of the world in one form or another. And Tesla is more than a bit dated.
Tesla’s last new model was the Cybertruck in 2023. It’s been an amazing flop as one might have suspected just looking at the silly thing. It’s the 2023 Edsel.
Prior to that, the Tesla model Y was introduced in 2020. Model Y deliveries started March of 2020, over five years ago.
Musk said his next car won’t have a steering wheel. Good luck with that idea, especially since Tesla Full Self Driving (FSD) is a joke.
Motor Trend Tests Tesla’s FSD, Tesla Flunks 3 Ways, Funny Videos
On July 20, I commented Motor Trend Tests Tesla’s FSD, Tesla Flunks 3 Ways, Funny Videos
Tesla’s FSD is not ready for prime time and won’t be without LIDAR.
Musk has said his next model release will be a a robo-taxi without a steering wheel. It’s doomed from the start.
Play the video. It’s hilarious.
GM Spiral
EVs will eventually win. Meanwhile it’s hybrids. The US lags on both, still producing large cars and trucks that baby boomers, gen X, the older millennials, and unions like.
Neither the automakers nor the unions are prepared for the inevitable transition.
Ford CEO: China’s EV Costs, Tech, and Quality “Far Superior” to the West
On June 30, I noted Ford CEO: China’s EV Costs, Tech, and Quality “Far Superior” to the West
“Their cost, their quality of their vehicles is far superior to what I see in the West,” Farley said. “We are in a global competition with China, and it’s not just EVs.”
BYD Pricing
In China, BYD offers a range of electric vehicles (EVs) at various price points, with some models starting under $10,000. For example, the BYD Seagull EV has a starting price of 69,800 yuan (approximately $9,555) and can be found with discounts down to 55,800 yuan (about $7,780). The company also offers more premium models like the Han EV, which starts at around $32,800.
My post brought out the expected ad hominem attacks on Ford and its CEO.
But look at the details.
“Drivers get in the car and their phone pairs automatically, and an AI companion equivalent to ChatGPT handles everything from navigation to entertainment. The vehicles also have facial recognition that knows which seat someone is in and adjusts media preferences.“
The Western manufacturers do not have that at any price.
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This copper tariff is seriously idiotic. And it follows on the heels of idiotic tariffs on steel.
The US will be the high cost producer of Steel, Copper, Aluminum, cars, everything. A few thousand manufacturing and mining jobs return. Call it 100,000 jobs if you like.
We will lose 1,000,000 jobs elsewhere in the process. Many small businesses will go bankrupt.
There is no advantage to paying the most in the world for Steel, Copper, Aluminum, and cars.
It’s idiotic to try to bring all manufacturing back to the US. All that will do is make US the high-cost producer of everything.
Exports, except services and technology exports, where the US still has an edge, will collapse.
Meanwhile, this TACO deal with Japan was better than the market expected for now.
