Japan's automakers land in tough spot after latest US debacle

The U.S. and Japan have been two of the closest trade partners for decades.

By 1964, the U.S was exporting $2 billion in goods to Japan while importing $1.8 billion. Trade with Japan represented 8.3% of U.S. foreign trade.

That was the last year the U.S. had a trade surplus with Japan. Since 1965, Japan has exported more goods to the U.S. than it takes in every year.

Back then, Americans mainly were buying Japanese radios and television sets. By 1971, Japan's exports to the U.S. had nearly tripled to $7.3 billion, while U.S. exports to Japan had only doubled to $4.3 billion.

By the 1990s, Japanese imports accounted for 15.6% of U.S. trade, making the Land of the Easter Sun the country's second-largest foreign investor behind Great Britain, with assets worth $83 billion.

Unsinkable Japan-U.S. trade partnership hits Trump iceberg

Fast forward to 2021. The U.S. and Japan announced the formation of the U.S.-Japan Partnership on Trade, and the pair, along with the European Union, agreed to renew their trilateral partnership.

U.S. goods and services trade with Japan totaled an estimated $319.2 billion in 2024, up 4% ($12.2 billion) from 2023. Total goods trade (exports plus imports) with Japan was an estimated $227.3 billion.

However, that strong partnership seems to be disintegrating under President Donald Trump's administration.

Earlier this week, President Trump's Commerce Secretary Howard Lutnik said the two countries would finally announce the details of their trade agreement that was supposedly signed weeks ago.

Lutnik went on to claim that the $550 billion U.S. investment Japan agreed to as part of the agreement would be “at the hand of Donald Trump, and he can go invest it.”

But on Thursday, Lutnik's counterpart, Ryosei Akazawa, canceled his scheduled trip to the U.S. over issues related to the agreement, according to Japanese news outlet NewsJp.

Japan's lead negotiator “suddenly canceled” the trip, which was scheduled for August 28 through 30.

An unnamed government official told the news service that the trip was canceled because “some administrative matters needed to be confirmed” and that it has not decided whether the trip will be rescheduled.

Akazawa held a press conference on Aug. 27 where he reportedly said, “It is important to implement the Japan-U.S. agreement in good faith and promptly.”

For Japan, automotive tariffs are the top priority

The U.S. agreed to lower the tariff on Japanese auto imports to 15% from 27.5% last month as part of the agreement.

Last month, Akazawa said he held a 40-minute phone call with U.S. Commerce Secretary Howard Lutnik, where “we are trying to agree on a package of measures.”

According to Reuters, those measures include expanded trade, non-tariff barriers, and cooperation on key economic security issues.

However, the biggest issue on the table is Japan's auto sector.

“There's no point striking a deal with the U.S. without an agreement on automobile tariffs,” Akazawa said.

“The two countries must garner trust through sincere dialogue, and reach common ground step by step. Through such a process, my job as negotiator is to agree on a full package as soon as possible.”

Japanese automakers have risen to the top of the U.S. auto industry

According to one estimate, Japan exported $40.76 billion worth of cars to the U.S. in 2024, representing nearly 19% of all auto imports.

Toyota ranks second with 15% U.S. market share, while Korean brand Hyundai ranks fourth with 11%. Toyota's fellow Japanese brand, Honda, is fifth in the market, with 9%.

Toyota sold over 2.3 million vehicles in the U.S. in 2024, a 3.7% year-over-year increase.

But Japanese brands don't just ship cars to America; they also build them here.