Japanese automakers losing $20M daily due to Trump's tariffs: Report
What's the story
Japanese automakers are losing an estimated 3 billion yen ($20.3 million) in combined profits every day that the United States delays reducing auto tariffs, according to Nikkei Asia. The full-year impact of these duties is expected to be around 2.7 trillion yen ($18.3 billion), which would reduce the total operating profit by a whopping 36% for six major manufacturers (excluding Nissan).
Tariff impact
US yet to implement new 15% rate
The US raised tariffs on Japanese vehicles from 2.5% to a whopping 27.5% in April, but agreed last month to cut the rate to 15%. Goldman Sachs Japan has estimated that this reduction could lessen the damage by some 1.6 trillion yen. However, every month of delay in implementing these changes adds about 100 billion yen to automakers' burden, Nikkei Asia reported.
Cost-cutting measures
Mazda and Subaru's projections
Mazda, which derives nearly a third of its sales from the US market, expects an 82% drop in net profit to 20 billion yen this fiscal year. The company plans to offset the blow with 80 billion yen in cost cuts. Subaru, which gets 70% of its sales from the US, projects a hit of 210 billion yen and a 51% drop in operating profit to 200 billion yen.
Major losses
Toyota expects biggest loss
Toyota expects the biggest loss of 1.4 trillion yen due to high US sales and supplier costs. The company's forecast also assumed an August 1 start date for the tariff reduction. In July, Toyota raised its US prices by an average of $270, citing "the improved performance of the vehicles rather than the tariffs."
Strategic adjustments
Automakers looking at price hikes, cost-cutting measures
Despite the challenges posed by tariffs, automakers are looking at price hikes and cost-cutting measures to offset losses. Honda CFO Eiji Fujimura said they are "considering [price hikes] cautiously." Meanwhile, Mitsubishi Motors raised prices in June but still reported a 3 billion yen operating loss in North America last quarter due to tariffs. Toyota expects savings, higher sales volume, and better model mix will add 899.5 billion yen to its operating profit.
Negotiation outlook
Japan's chief trade negotiator optimistic about tariff reduction
Japan's chief trade negotiator Ryosei Akazawa is hopeful that the US will lower the tariff rate when Washington corrects its "reciprocal" tariff order. He said both sides "tacitly share an understanding that it'd be best to do it quickly." This optimism comes as Japanese automakers continue to grapple with the financial impact of high US tariffs on their vehicles.