Trump's confidence in taking action against Japan: "Japanese cars that dare not raise prices"

The more you don't fight back, the harder the hit?

In an environment filled with uncertainty in global trade, Japanese automakers are facing high tariffs and have chosen to absorb most of the costs themselves. This strategy has temporarily alleviated price pressure on American consumers, but it may weaken Japan's position in tariff negotiations.

According to media reports, only three of Japan's six major automakers have raised prices in the U.S. market, and the increases are far below the 25% tariff rate on imported vehicles. Toyota Motor Corporation, the world's largest automaker, has only raised prices by a few hundred dollars on certain models, Mitsubishi Motors has an average increase of 2.1%, and only Subaru's price increase is close to the tariff level.

Another set of data from Japan's Ministry of Finance shows that in May, the average export price of Japanese cars to the U.S. plummeted by about 20% year-on-year, while export volume only decreased by 3.9%, indicating that Japan is maintaining shipment volume and market share through significant price reductions, but profits have been severely impacted.

In contrast, the average price of new cars in the U.S. rose by 2.5% in April to about $48,700.

As the "tariff deadline" on July 9 approaches, comprehensive tariffs on Japanese goods in the U.S. will rise to 24%, with Trump even hinting that it could be as high as 35%. Japan's chief trade negotiator, Akizawa Ryo, is in the seventh round of negotiations with the U.S., but both sides remain deadlocked.

Mild Response May Weaken Negotiation Leverage

Analysts believe that Japanese automakers hope to respond quietly to avoid angering American consumers while buying time for negotiations.

However, this approach of avoiding significant price increases may backfire. Since American consumers have not felt a noticeable price shock, the pressure on the Trump administration to change tariff policies has decreased, which may strengthen its position in trade negotiations.

Carnorama analyst Miyao Takeshi stated that if car prices continue to rise due to tariffs, the government will realize that raising tariffs is not simply beneficial to the U.S. economy, which may prompt changes in tariff negotiations.

U.S.-Japan Negotiations Stalemated, Price Increases by Automakers May Be Inevitable

Currently, trade negotiations between the U.S. and Japan have entered a critical stage, but there are significant differences in positions.

Japan's chief trade negotiator, Akizawa Ryo, has made it clear that even with the July 9 deadline approaching, he will not rush to reach an agreement under pressure.

The automotive industry is the core point of contention in U.S.-Japan negotiations, with Trump consistently emphasizing the trade deficit in the automotive sector and demanding greater concessions from Japan. Meanwhile, Japan hopes to resolve all tariff disputes in one go to avoid long-term impacts on its core economic industries.

Bloomberg Intelligence senior analyst Tatsuo Yoshida pointed out that if negotiations drag on, automakers may gradually raise prices by enhancing vehicle specifications, but fully reflecting the cost of a 25% tariff may take three to four years.

Although Japanese automakers are currently choosing to absorb costs, industry insiders generally believe that maintaining a low-profit state in the long term is unsustainable. Carnorama's analyst Takeshi Miyao stated:

"In the absence of certainty about how long high tariffs will last, there is no reason to indefinitely cut profits to offset costs."

Other analyses point out that Japanese automakers are facing a dilemma: if they do not raise prices, ongoing profit losses could lead some companies into financial crisis; if they do raise prices, it may result in a decline in demand in the U.S. market, with market share being taken by domestic U.S. companies or other cheaper foreign automakers