"Japan Fails in Strategy to Reduce Auto Tariffs to 10%"

"Ishiba Fails to Persuade Trump at G7 Summit"

Japan's Auto Exports to the U.S. Plunge 24.7% in May

Japan, which has served as a reference point in Korea-U.S. auto tariff negotiations, reportedly attempted to lower the auto tariff rate to 10% but failed to persuade Trump.

On the 18th (local time), Reuters, citing sources, reported that Japanese Prime Minister Ishiba, who attended the G7 summit in Canada, met with U.S. President Trump and requested a deferral of the 25% tariff on automobiles. However, it was reported there were clear differences in positions between the two governments.

Officially, the Ishiba administration stated it was aiming for a full exemption from Trump's auto tariffs, but anonymously sourced information said that privately, Japan was trying to persuade Washington to lower the rate to around 10%.

President Trump, in a trade deal with the United Kingdom announced at the G7, agreed to impose a 10% tariff on British auto import quotas. However, the U.K. runs a trade deficit with the U.S., and the scale of its auto exports to the U.S. is much smaller than Japan's.

As with Korea, the impact of Trump’s tariffs on Japan's auto industry is enormous.

Japan's automobile industry employs 1 out of every 10 workers in the country, and last year, nearly 28% of Japan's total exports to the U.S.—¥5.88 trillion out of a total ¥21 trillion (₩199 trillion)—came from the auto sector.

According to the Japanese government announcement on this day, Japan's total exports in May dropped 1.7% year-on-year to ¥8.1 trillion (about ₩76.78 trillion), marking the first decline in eight months. Exports to the U.S. plunged 11.1% year-on-year, recording the largest monthly drop since February 2021.

In particular, auto exports plummeted 24.7%, while auto parts exports fell 19%. The strong yen also contributed to the decrease in export value.

On a volume basis, shipments of autos to the U.S. were down only 3.9%, indicating that Japanese companies were absorbing the cost of tariffs.

Toyota and Honda have already indicated that they likely saw their profits drop by as much as ¥180 billion (about ₩1.7 trillion) in just April and May due to tariffs. Honda has forecast earnings losses totalling ¥650 billion this year because of tariffs.

To lower auto sector tariffs, Japan's negotiation team pledged to ramp up purchases of U.S. gas and other products. However, according to a source, just before Ishiba arrived in Kananaskis, Canada (venue for the G7 summit), Japanese negotiators learned Trump had no intention to make concessions.

The lack of progress appears to deal a blow to Ishiba's diplomatic reputation. Some political analysts say Prime Minister Ishiba plans to run in next month's upper house election, and could be ousted if his party loses its majority.

A senior lawmaker close to the prime minister said Ishiba will now put trade talks on hold and focus on persuading President Trump to extend the broad mutual tariff deferral period, which has been postponed to July 9.

Otherwise, Ishiba faces the prospect of running in the election next month with Trump’s tariffs fully in effect. Mizuho Research & Technologies estimated that if sectoral tariffs and reciprocal tariffs of 24% are combined, Japan's GDP could shrink by nearly 1%.

Ishiba may have another chance to negotiate with President Trump later this month. Both leaders are scheduled to attend the two-day NATO summit in The Hague from June 24.

Junga Kim, Contributing Reporter kja@hankyung.com