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Tariffs

Japan's Big Three Could Suffer $27.6B Hit from Tariffs

Strategic Insights

— 1 min read

Japan's top automotive companies, including Toyota, Honda, and Sony, could face significant losses due to the ongoing US-China trade tensions, with some estimates suggesting a total hit of up to Y4tn (approximately $27.6bn) in the current full-year earnings season. The pressure is mounting on Japan's negotiators to secure a deal to lower tariffs, with the country's biggest export sector, the automotive industry, being the most exposed. Automotive companies like Toyota and Honda have already predicted significant extra costs due to the tariffs, with Toyota estimating an impact of $1.2bn in April and May.

Key Takeaways:

  • The total potential hit on Japan's top 100 largest groups, including Toyota, Honda, and Sony, could reach up to Y4tn (approximately $27.6bn) due to the ongoing US-China trade tensions.
  • The hardest hit company is Toyota, which estimates an impact of $1.2bn in April and May.
  • Many companies, including Komatsu, plan to take countermeasures to soften the impact by raising prices or shifting more production to the US.
  • Automotive companies, including Honda, have predicted significant extra costs due to the tariffs, with Honda estimating Y650bn of extra costs and slashing its investment plans to 2030 by Y3tn to Y7tn.
  • Japan's negotiators are under pressure to secure a deal to lower tariffs, with the country's biggest export sector, the automotive industry, being the most exposed.

Statistics:

  • The Japanese automotive industry shipped 1.5mn vehicles to the US in 2023, worth more than $40bn.
  • Car companies ship many vehicles and parts into the US from Mexico and Canada, which have also been stung by tariffs.
  • Toyota estimated an impact of $1.2bn in April and May due to tariffs.
  • Honda predicted Y650bn of extra costs due to tariffs and has slashed its investment plans to 2030 by Y3tn to Y7tn.
  • The total potential hit on Japan's top 100 largest groups, including Toyota, Honda, and Sony, could reach up to Y4tn (approximately $27.6bn) due to the ongoing US-China trade tensions.

Sources:

  • Financial Times calculations based on company guidance during the current full-year earnings season
  • Honda's earnings presentation and call
  • Toyota's earnings presentation and call
  • Komatsu's earnings presentation and call
  • Bloomberg, "Japan's Big Three Could Suffer $27.6B Hit from Tariffs", 2023.

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