TradingKey - As U.S.-Japan trade negotiations enter a critical phase, President Donald Trump has warned that he may not lift the proposed 25% tariff on Japanese auto imports, potentially worsening the downward pressure on Japan’s already struggling industrial sector.

In an interview with Fox News on Thursday, June 29 , Trump said that the U.S. gives Japan no cars, yet Japan sends millions of vehicles into the U.S. market — and that’s very unfair.

He added that he could unilaterally impose the tariffs by simply sending a letter — effectively ending any deal. If no agreement is reached, he reiterated, the 25% tariff will stay.

Critical Stage in Trade Talks

This statement comes amid the seventh round of U.S.-Japan economic and trade negotiations .

Japanese trade negotiator Ryosei Akazawa responded on social media, stating that the talks are at a “critical stage” , and Japan remains committed to conducting sincere and serious discussions. He noted that both sides have expressed willingness to continue negotiations this week.

The United States is Japan’s largest export market for automobiles. In 2024, Japan produced 8.23 million vehicles domestically, of which 1.37 million were exported to the U.S.

Last year, Honda derived 37% of its global sales from the U.S. market, followed by Nissan at 28% and Toyota at 23%.

Analysts estimate that if the U.S. imposes a 25% tariff on Japanese autos, it could cost Japan up to ¥13 trillion (over 2%) of nominal GDP.

Weak Industrial Data Adds to Concerns

Data released on June 30 showed that Japan’s industrial production rose just 0.5% month-on-month in May, far below the expected 3.5% gain. On an annual basis, industrial output fell 1.8%, compared to expectations for a 1.6% increase.

Economists noted that Japanese industry is beginning to factor in the potential impact of U.S. tariffs. While there is still no sign of major disruption, forward-looking indicators suggest increasing downside risks to industrial activity.

With weak consumer spending and external demand, Japan’s real GDP in Q1 2025 declined 0.2% quarter-over-quarter.

Some analysts believe that U.S.-Japan trade talks may turn into a prolonged tug-of-war. To maintain output levels, companies are resorting to price cuts — which could hurt corporate profits and employee bonuses, further dampening consumption.

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