Trumps Tariff Impact: Japans Auto Exports Plummet, Trade Deficit Widens

Japan's exports fell in May, with shipments of autos to the U.S. dropping nearly 25% from a year earlier due to higher tariffs imposed by President Donald Trump. The Finance Ministry reported on Wednesday that exports fell 1.7% year-on-year, which was less than the decline analysts had forecast. Imports sank 7.7%, reflecting weakening domestic demand and worse than the 2% fall recorded in April. The trade deficit in May was 637.6 billion yen, or $4.4 billion.

The auto industry is a key pillar of Japan's economy, and Japan exports more than a million vehicles to the U.S. a year. Tokyo has repeatedly stressed that automakers like Toyota and Honda produce cars in North America, contributing to the economy and creating jobs. However, Japan has yet to reach a deal with Trump on resolving the tariffs issue, with Prime Minister Shigeru Ishiba saying after he met with the U.S. president at the Group of Seven summit in Canada earlier this week that the two sides were unable to agree on some points.

Trump has imposed a 25% additional tariff on Japanese autos and a 24% tariff on other goods. He recently said the auto tariff may become even higher, which has caused significant harm to Japan's economy and its relationship with the U.S. Ishiba has emphasized that Japan is an important ally in a key bilateral defense alliance with Washington and that he is pushing to protect his own country's national interests.

The picture above shows Tokyo Tower amid tall buildings as a container ship leaves a cargo terminal in Tokyo on April 9, 2025. The image highlights the importance of trade and the impact of tariffs on both countries' economies.