The Shock to Japan's Automotive Industry
2025 has become a year of reckoning for Japan's automotive industry. The additional tariffs imposed by the Trump administration in April delivered a devastating blow to Japan's core manufacturing sector, significantly impacting the financial performance of all major automakers.
The seven largest Japanese automakers—Toyota Motor Corporation, Honda Motor Co., Nissan Motor Co., Suzuki Motor Corporation, Mazda Motor Corporation, Subaru Corporation, and Mitsubishi Motors Corporation—reported a combined ¥1.5 trillion (approximately $10 billion) impact from Trump tariffs in their April-September 2025 interim financial results. This marked the first time since the COVID-19 pandemic in 2020 that all seven companies posted year-on-year profit declines.
Timeline of Tariff Changes and US-Japan Negotiations
In April 2025, President Trump announced "reciprocal tariffs" on countries around the world. Japan faced a 24% tariff rate, while automobiles specifically were hit with an additional 25% on top of the existing 2.5% rate, bringing the total to 27.5%—a dramatic increase from pre-tariff levels.
Following intense negotiations between Japan and the United States, an agreement was reached in July 2025. Beginning September 16, the tariff rate was reduced from 27.5% to 15%. While this represented significant relief, the rate remains substantially higher than the pre-tariff 2.5%, creating what industry executives have termed a "new normal."
Company-by-Company Impact Analysis
Toyota Motor Corporation
Toyota absorbed approximately ¥900 billion in tariff costs but managed to limit profit declines thanks to strong hybrid vehicle sales. Global sales increased 5% year-on-year, setting new records. CEO Koji Sato stated that the company is "not in a position where we need to scramble" and announced they would avoid "ad-hoc price pass-throughs."
Honda Motor Co.
Honda projected annual tariff costs of approximately ¥450 billion. The four-wheel vehicle business fell into a ¥73 billion operating loss. Executive Vice President Noriya Kaihara described the tariffs as "the new normal that we expect will persist," emphasizing the company's strategy of building production capacity where demand exists. Honda announced plans to relocate Civic hybrid production from Japan to the United States.
Nissan Motor Co.
Tariff-related profit losses reached approximately ¥149.7 billion. Combined with weak performance in China, Nissan fell into the red for the interim period. The company is working to expand US-produced model sales and revise dealer incentive structures, though full-year guidance remains "undetermined."
Mazda Motor Corporation
With approximately 30% of US sales coming from Japanese exports, Mazda took a direct hit from the tariffs. Japan operations posted an ¥85.5 billion operating loss, with the company reporting an overall net loss for the period. However, CFO Jeffrey Guyton noted that US new vehicle demand is "stronger than expected."
Subaru Corporation
The impact was particularly severe for Subaru, which depends on the US for roughly 80% of global sales. With US production capacity of approximately 350,000 units against sales of about 680,000 units, imported vehicles represent a significant portion of their lineup. Japan operations fell into a ¥15.5 billion operating loss. The company aims to secure ¥100 billion in operating profit through cost reductions and lineup expansion.
Mitsubishi Motors Corporation
Having withdrawn from US production, Mitsubishi faced direct exposure to the high tariffs. The company saw most of its interim revenue wiped out and fell into the red.
Suzuki Motor Corporation
As Suzuki does not sell four-wheeled vehicles in the United States, direct tariff impact was limited. However, the company remains cautious about semiconductor-related issues and developments in other markets such as India.
Full-Year Outlook and Ongoing Challenges
For the fiscal year ending March 2026, total tariff impact is projected to reach approximately ¥2.5 trillion across the seven companies. While the September rate reduction should ease pressure in the second half, the challenging environment persists.
Companies are implementing various countermeasures:
- Expanding US local production capacity
- Restructuring supply chains
- Accelerating cost reduction initiatives
- Reviewing product lineups based on profitability
- Considering price adjustments (though competitive pressures make this difficult)
Multiple Headwinds Facing the Industry
Beyond Trump tariffs, Japan's auto industry faces several concurrent challenges. Chinese automakers are rapidly gaining market share in Southeast Asia and Australia—regions traditionally dominated by Japanese brands. According to a 2025 PwC report, Japanese automakers' combined market share in ASEAN-6 countries fell from 68.2% in 2023 to 63.9% in 2024.
Additionally, the industry must continue investing heavily in electric vehicle development, autonomous driving technology, and Software-Defined Vehicles (SDV). These multi-faceted challenges are forcing companies to fundamentally reconsider their strategies.
Industry Restructuring Discussions
The pressure has intensified discussions about industry consolidation. While the proposed Honda-Nissan merger ultimately fell through, speculation persists about expanded collaboration among automakers. One megabank executive commented, "Only Toyota has the strength to weather the Trump tariff crisis on its own. Others will be forced into alliances or restructuring."
Conclusion: A Critical Moment for Japan's Core Industry
The automotive sector is among the most US-dependent of Japan's manufacturing industries, meaning tariff impacts ripple through the broader Japanese economy. Concerns extend to the entire supply chain, including parts manufacturers and raw materials suppliers.
While some in Japan have characterized the Trump tariffs as "like a natural disaster," automakers are treating them as the "new normal" and developing long-term response strategies. The industry continues to watch closely for developments in tariff policy, US-Japan relations, and corporate strategy adjustments.
Is the automotive industry in your country also affected by US tariff policies? How do you think nations should respond when their core industries face such significant external pressures? We'd love to hear your thoughts!
References
- https://www.yomiuri.co.jp/economy/20260119-GYT1T00386/ (Yomiuri Shimbun Online)
- https://www.nippon.com/en/in-depth/a10405/ (Nippon.com)
- https://www.japantimes.co.jp/business/2025/11/08/companies/japan-automakers-billions-tariff-losses/ (Japan Times)
- https://www.cnbc.com/2025/07/28/trump-tariff-deal-offers-scant-relief-for-japan-auto-nissan-toyota-madza-china-threat-looms.html (CNBC)
- https://www.nationthailand.com/business/automobile/40058071 (The Nation Thailand)
Reactions in Japan
When I heard ¥1.5 trillion in Trump tariffs, it didn't sink in at first, but that's over ¥10,000 per Japanese person in losses, right? Isn't this kind of serious?
Toyota really is strong. Their all-in strategy on hybrids is paying off now. The gap with other companies is becoming very clear.
I don't think Nissan's losses can be blamed entirely on tariffs. There have been ongoing management mistakes before this.
When the weak yen was generating profits, everyone celebrated 'record earnings!' So we have to accept losses from tariffs too. Both exchange rates and tariffs are external factors.
The term 'new normal' kind of irritates me. Basically it means they've given up, right?
15% is still high, but at least it's down from 27.5%. I think we should appreciate the Japanese government's negotiation efforts.
Mazda and Subaru's dependence on the US market is worrying. They should diversify their markets even now.
In the end, we can't go against America. Japan should reduce its dependence on the US from an economic security perspective.
As someone from Aichi Prefecture, this isn't someone else's problem. A friend working at a local parts maker said they're already talking about production cuts.
America's Big 3 are also suffering from the tariffs, so in the end, nobody's winning from this.
The rise of Chinese manufacturers is the bigger long-term threat. Tariffs are temporary, but once you lose market share, it doesn't come back.
If the auto industry goes down, the Japanese economy is finished. The government should provide national-level support.
Honda moving Civic production to America - what happens to Japanese jobs? This will accelerate the hollowing out of domestic industry...
Trump's tariff policy is crazy, but apparently there's strong demand in America for manufacturing revival. It does reflect public opinion.
This situation reminded me that Japanese car quality and value for money is something to be proud of globally. I hope they persevere through these headwinds.
Looks like the era of Toyota dominance will accelerate. I'm genuinely worried about whether Nissan will be okay.
Even with the reduced rate, 15% is still 6 times the previous rate. This isn't something we can just say 'good' about.
I hope this motivates them to seriously develop markets in India and Southeast Asia. Relying solely on the US is too risky.
As an American, this is embarrassing. Japanese cars are high quality, and raising prices through tariffs just means consumers lose out.
I love my Camry. Worried that tariffs will make it more expensive when I buy my next one. Hang in there, Toyota!
German automakers face the same problem. Trump's tariff policy is disrupting the global automotive industry.
Hyundai and Kia in Korea are also in a tough spot. Envious that Japan negotiated down to 15%. Hope Korea can negotiate soon too.
Living in Detroit, I don't think tariffs will increase American jobs. Japanese manufacturers already employ tons of people in America.
From the UK perspective, American protectionism goes against the spirit of free trade. It's bad for the global economy.
I understand the America First policy. Japan has also protected its own market for many years.
French auto industry faces similar challenges as Japan. The EU needs to negotiate firmly with America.
This is an opportunity for Chinese manufacturers. If Japanese cars become expensive, competitively priced Chinese cars will be chosen.
Japanese car market share is declining in Australia too. The improving quality of Chinese cars is a real threat.
I work at an auto plant in Mexico. If Japanese manufacturers move production, we might lose our jobs.
Suzuki from Japan is strong in the Indian market. Maybe they can offset US losses with gains in India.
I work at the Nissan plant in Texas. As an American, I'm grateful to Japanese companies. Tariffs are the wrong policy.
Canada is also suffering from tariffs. Despite NAFTA, Trump's administration shows no mercy even to allies.
Thailand's auto industry also depends on Japanese manufacturers. When Japan struggles, it affects us too.
Honestly, tariffs made me consider buying American. But the reality is there are few options.