Japanese automakers, with decades of investments in the U.S., are looking at major fallout from President Trump’s tariffs. The cost of tariffs for the country’s seven biggest car brands could exceed ¥3.5 trillion ($24 billion), says UBS Securities. Toyota alone accounts for ¥1.8 trillion ($12 billion), the firm says.
The irony: Japan does not charge U.S. automakers, or any foreign automakers, tariffs on vehicles imported into Japan. Japan does charge nominal tariffs on other categories of goods: agriculture (15.5%) and clothing (9.2%), according to Trade.gov.
In fairness to American importers, the Japanese automobile market has not been welcoming. The nation’s buyers prefer home-country brands and smaller cars in general, many of which fit into tight size and powertrain restrictions imposed by the Japanese government. The simple fact that Japanese vehicles are right-hand drive creates a barrier for U.S. automakers geared to building left-hand-drive vehicles.
What can the Japanese automakers do in response to the tariffs?
“Japanese car manufacturers will probably have to take some kind of action, such as transferring production to the United States,” says Kohei Takahashi, an analyst at UBS.
The Japan Automobile Manufacturers Association (JAMA) says more than 30% of all Japanese car exports in 2023 went to the U.S., making it the largest single-country export destination. Trade data from Japan’s Ministry of Finance shows that cars accounted for around 30%, or ¥6 trillion ($40 billion), of total exports from Japan to the U.S. in 2024.
Toyota has a significant manufacturing presence in the U.S. and could transfer production into the U.S., but it would take time. And Toyota would have to be convinced that tariffs are permanent, even if Democrats regain control of Congress and/or the White House. In 2024, Toyota built an estimated 1.5 million vehicles inside the U.S., against capacity of the same, according to Wards' analysis, suggesting the automaker would have to increase its manufacturing footprint if forced to move more production to the states.
Toyota has assembly plants in Kentucky, Alabama, Mississippi, Indiana and Texas, engine plants in Alabama and West Virginia and a battery plant in North Carolina. It also has two plants in Mexico that build the Tacoma.
The Corolla and RAV4 have been among the best-selling models in the U.S. for decades. However, the RAV4 is manufactured in Canada, and even though the Corolla is made in the U.S., 25% of its parts are imported.
Toyota’s North American division has informed its suppliers that it will pay for the extra costs of parts imported from Mexico and Canada.
Toyota imports the following models into the U.S. from Japan, Mexico and Canada: 4Runner, Land Cruiser, Prius, GR Corolla, GR Supra, Mirai, Venza and Tacoma.
According to one Congressional staffer who spoke with WardsAuto on Monday, lobbyists representing Japanese automakers are working through members of Congress to get relief from tariffs, making the case that they have been huge investors in red states and red districts. Besides Toyota, Nissan, Honda and Subaru all have factories and supplier campuses in red states.
The staffer says they are watching closely to see if Trump gives relief to Japanese automakers and not the Detroit Three and Tesla. “That will be interesting,” the staffer says.
“It’s chaotic, because the White House is trying to undo decades of trade agreements and upending tens of billions of investments in a month, and they don’t seem to care about the details or the fallout,” the staffer tells WardsAuto on background because they are not authorized to speak for the Congressperson.
