Who are the biggest losers from Trump's auto tariffs? Goldman Sachs: Japanese automakers' profits may be "halved"

The tariff policy of the Trump administration is stirring up a storm in the global automotive industry. In this zero-sum game, Japanese automakers may become the biggest losers.

According to CCTV, U.S. President Trump signed an executive order on Wednesday, announcing a 25% tariff on all imported cars. The related measures will take effect on April 2.

After Trump's announcement of the auto tariffs, the stock prices of traditional automakers such as Toyota and Honda generally fell. According to Goldman Sachs' latest forecast, if costs cannot be passed on, the profits of Japanese automotive giants like Toyota and Honda will be "halved," with Nissan and Mazda's operating profit potentially dropping by as much as 66% and 34%, respectively. More critically, the Japanese economy is already on the brink of recession, and the "wage-price virtuous cycle" driven by the automotive industry will come to an abrupt halt.

The "Great Escape" of the Global Automotive Industry: Japanese Automakers at the Forefront

Bloomberg data shows that 46% of the cars sold in the U.S. each year rely on imports, with Japanese automakers contributing 1.3 million units (another 400,000 produced in Mexico). Cars account for over 30% of Japan's exports to the U.S., and the U.S. market consumes 46% of Japan's total automotive sales. Trump's tariff policy directly chokes the lifeblood of the Japanese economy.

Goldman Sachs analyst Kota Yuzawa's model indicates that if Japanese automakers choose to raise prices to offset the tariffs (a 25% increase), sales will decline by 8%-26%, and profit shrinkage will reach 6% (Toyota) to 59% (Mazda).

However, a more extreme scenario is that if automakers refuse to raise prices, profits will collapse directly—Toyota will lose 570 billion yen, Honda 350 billion yen, Nissan 130 billion yen, and Mazda 60 billion yen.

The consequences will be catastrophic. According to Goldman Sachs' forecast, in this scenario, by the fiscal year ending March 2026, Toyota's operating profit will decline by 11%, Honda by 23%, Nissan will drop by 66%, and Mazda by 34%. Nissan and Mazda will be relatively more affected because their export mix mainly comes from Canada and Mexico.

The "Domino Effect" of the Supply Chain: Parts Suppliers Cannot Escape the Disaster

The impact of the tariffs extends far beyond complete vehicles. Japanese parts giants like Denso and Aisin export parts produced in Mexico/Canada worth 220 billion yen and 60 billion yen, respectively, to the U.S.

According to Goldman Sachs' estimates, if the 25% tariff is implemented, the profits of these two companies could plummet by 55 billion yen and 15 billion yen. Toyota Boshoku also warned that its seat sewing business in Mexico will suffer a "significant blow."

Although some companies hope that the depreciation of the Mexican peso or U.S. tax cuts will cushion the impact, analysts point out that the "wage increase wave" driven by overseas profits for Japanese automakers in recent years is destined to end—after profit evaporation, layoffs and salary freezes will become the only options

Japan's Economy "Perfect Storm": From Recession to Deflation Cycle

Nomura Research Institute economist Kiuchi Takahide estimates that a 25% tariff on automobiles will directly lower Japan's GDP by at least 0.2%, enough to push Japan into recession. More critically, the automotive industry was key to breaking Japan's deflation cycle: it used overseas profits to support domestic wage growth. Now that this chain has broken, the probability of the Bank of Japan raising interest rates in May has also plummeted.

Japan's Chief Cabinet Secretary Hiroshi Matsuno has stated that they are "closely monitoring the situation," but in the face of Trump's trade stick, Tokyo has almost no cards to play. Foreign exchange analysts point out that the only thing Japan can do is perhaps delay the normalization of monetary policy to cope with the impending economic winter