Japan’s exports fall for fourth month as US shipments tumble
The Trump administration’s higher tariffs continue to disrupt global commerce even as deals have been reached
[TOKYO] Japan’s exports fell for the fourth consecutive month as US President Donald Trump’s tariffs continued to cloud the prospects for global commerce, especially for trade involving the US.
Exports edged down 0.1 per cent in August from a year earlier, led by cars and steel, the Finance Ministry reported Wednesday (Sep 17). Gains in shipments to Asia and the EU helped limit the drop. Economists had forecast a 2 per cent fall. At the same time, Japan saw the largest drop in the value of shipments to the US in more than four years.
Overall, Japan’s trade balance was in the red, with a 242.5 billion yen (S$2.1 billion) deficit. Imports declined by 5.2 per cent, compared with the consensus estimate of a 4.1 per cent retreat.
The latest slide in Japan’s exports comes as companies around the world continue to absorb the shock from Trump’s trade policies. For export-reliant Japan, hits from trade put the country’s still fragile growth at risk, potentially derailing the positive cycle between inflation, wage gains and growth that authorities are seeking.
“With the new US tariff rate set at 15 per cent for automobiles and other goods, the question is how Japanese companies will respond going forward,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Companies beyond carmakers may also try to absorb the tariff impacts through cost-cutting. If that happens, profits will decline, putting pressure on small and medium-sized enterprises, which could make it difficult for wages to rise.”
The fall in overall exports was led by a 13.8 per cent drop in the value of shipments to the US, with cars the main drag. Exports to China dropped 0.5 per cent and cargoes to Europe gained 5.5 per cent.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The Trump administration’s higher tariffs continue to disrupt global commerce even as deals have been reached. In late July, the US agreed to lower tariffs on imported Japanese cars to 15 per cent from 27.5 per cent, and to refrain from stacking previous tariffs on fresh 15 per cent universal tariffs, but those changes did not take effect until Sep 16.
In August, the US remained the biggest destination for Japanese exports after China. The value of car shipments to America declined 28.4 per cent while the number of units fell 9.5 per cent, a pattern that suggests Japanese automakers are continuing to slash prices to preserve market share in the US. That’s cutting into their profit margins, which could deal a blow to their ability to keep raising wages at the pace of the last two years.
The hit to corporate finances could be a headache for the Bank of Japan (BOJ) as it continues to look for opportunities to raise the benchmark rate at a gradual pace. Robust wage growth has been a key element behind the BOJ’s policy normalisation steps thus far, and with inflation having hovered at or above its 2 per cent target for more than three years, speculation over a rate hike has persisted.
Steel exports to the US, which continue to face 50 per cent levies, fell 26.2 per cent by value, but edged up in terms of volume, another indication of exporters likely absorbing some of the tariff impact through lower pricing. Those of semiconductors and pharmaceuticals fell 12.4 per cent and 12.8 per cent, respectively. As part of the July deal, the US gave Japan a safety clause on future sectoral tariffs affecting those industries, meaning Japan will not be treated more harshly than any other nation.
The July trade deal provided some relief to Japanese exporters, especially automakers, but whether the new rates stay in place will depend on the extent to which Tokyo implements a US$550 billion investment mechanism, a key pillar of the trade deal. Should Japan fail to fund projects via the vehicle, Trump can raise tariffs on Japanese goods again.
Japan had a 324 billion yen trade surplus against the US, meaning it will remain under pressure from Trump to close the gap, which the president has long criticised.
As the bilateral trade deal is being implemented, Japan continues to face ongoing pressure from the US to do more through non-bilateral means. The US is urging its allies in the Group of Seven, including Japan, to impose high tariffs on China and India for their purchases of Russian oil in an effort to convince President Vladimir Putin to end his war in Ukraine. BLOOMBERG
Share with us your feedback on BT's products and services
