How tariffs are hitting the Japanese auto sector

Summary

Marketplace Morning Report: How Tariffs Are Hitting the Japanese Auto Sector

Release Date: June 18, 2025

Introduction

In this episode of the Marketplace Morning Report, host Liana Byrne delves into the significant impact of President Trump's tariffs on Japan's automotive industry. The report highlights the economic repercussions, the Japanese government's response, and the broader implications for global trade. Additionally, the episode touches on other pertinent business and economic news, including oil prices, energy grid issues in Spain and Portugal, disruptions in Bali due to volcanic activity, and the geopolitical undertones of the St. Petersburg International Economic Forum.

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Japanese Automotive Exports Decline Due to U.S. Tariffs

Japan has experienced its first drop in exports in eight months, primarily driven by the 25% tariffs imposed by the United States on Japanese automobiles. This sector is a cornerstone of Japan's economy, with American consumers spending approximately $40 billion on Japanese cars last year—a figure representing about a third of all Japanese goods purchased by Americans.

Katie Silver from the BBC World Service reports:

"Now, though, these cars are subject to a 25% tariff, which other than Britain has hit the automotive industry across the [region]. This has contributed to Japanese exports to the US dropping by more than 11% in the month of May compared to the same period a year earlier." [02:10]

Government Response and Negotiations

Prime Minister Shigeru Shiba is actively seeking a resolution to mitigate the tariffs' impact. Despite negotiations at the G7 summit in Canada, significant disagreements remain unresolved.

Prime Minister Shigeru Shiba stated:

"Some disagreements persisted and despite negotiating until the last minute, I walked away empty-handed." [02:50]

The Japanese government is also bracing for potential reciprocal tariffs. If no agreement is reached by July 9th, Japan faces a 24% reciprocal tariff rate on European Union exports.

Broader Economic Context

Beyond the Japanese auto sector, the episode provides a snapshot of other global economic indicators:

• Oil Prices: Brent crude dipped slightly following a 4% surge driven by fears of supply disruptions due to the Israel-Iran conflict. Liana Byrne notes:

  "Brent is trading just above $76 a barrel. Markets are watching both the risk to shipping through the Strait of Hormuz and today's Fed decision." [03:08]

• Energy Grid Issues in Spain and Portugal: A significant blackout in April was attributed to excessive electrical voltage, revealing vulnerabilities in the regional power infrastructure.

• Volcanic Activity in Bali: The eruption of a volcano released ash six miles into the atmosphere, leading to widespread flight cancellations and delays during the peak tourist season.

St. Petersburg International Economic Forum: Geopolitical Implications

Often referred to as "Russia's Davos," the St. Petersburg International Economic Forum opened amidst heightened geopolitical tensions. The event, involving representatives from 140 countries, is being closely monitored for Russia's attempts to showcase economic resilience despite international isolation due to the Ukraine conflict.

Steve Rosenberg from the BBC World Service comments:

"The Russian authorities will almost certainly try to use this event to demonstrate that attempts to isolate Russia on the world stage have failed." [04:13]

He adds that geopolitical discussions, particularly those involving President Putin's stance on Ukraine and Middle Eastern affairs, are expected to overshadow purely economic dialogues at the forum. [04:55]

Impact on French Wine Exports to the U.S.

In addition to Japanese automotive exports, President Trump's tariffs are also affecting French wine producers. The 25% tariff imposed between October 2019 and April 2021 had previously resulted in a 50% drop in U.S. wine imports. Currently, a 10% tariff is in place, with fears of a potential increase to 20% that could replicate the severe downturn experienced earlier.

Francois Labbe, President of the Burgundy Wine Interprofessional Office, explains:

"We have in memory the tough situation we were in from October 2019 until April 2021, with a 25% tax due to an aeronautic conflict between France and the US. It really did affect our sales to the US." [07:36]

He elaborates on the possible repercussions if tariffs rise:

"If President Trump decides to impose this 20% tariff... we will go back to the 2019 situation where the market was almost, you know, stopped." [08:32]

Despite a recent 16% increase in sales of Burgundy wines to the U.S., largely driven by American preferences for both white and lower-alcohol red wines, the looming threat of increased tariffs poses a significant risk to the industry's stability.

Labbe further notes:

"For the United States, it's around 10% of the production, so it's a big portion for me." [05:57]

Conclusion

The imposition of tariffs by the U.S. administration under President Trump is having a multifaceted impact on global trade, particularly affecting Japan's automotive sector and France's wine industry. While Japan seeks to negotiate a favorable trade deal to alleviate the 25% tariffs, the potential for reciprocal tariffs looms as a significant threat. Concurrently, other economic indicators, such as oil prices and energy grid stability in Europe, alongside geopolitical events like the St. Petersburg Economic Forum, underscore the interconnectedness of global markets and the pervasive influence of political decisions on economic outcomes.

As these developments unfold, stakeholders across various industries remain vigilant, navigating the challenges posed by shifting trade policies and international relations.

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Notable Quotes with Timestamps

• Katie Silver: "Now, though, these cars are subject to a 25% tariff, which other than Britain has hit the automotive industry across the [region]." [02:10]

• Prime Minister Shigeru Shiba: "Some disagreements persisted and despite negotiating until the last minute, I walked away empty-handed." [02:50]

• Liana Byrne: "Brent is trading just above $76 a barrel. Markets are watching both the risk to shipping through the Strait of Hormuz and today's Fed decision." [03:08]

• Steve Rosenberg: "The Russian authorities will almost certainly try to use this event to demonstrate that attempts to isolate Russia on the world stage have failed." [04:13]

• Francois Labbe: "We have in memory the tough situation we were in from October 2019 until April 2021, with a 25% tax due to an aeronautic conflict between France and the US. It really did affect our sales to the US." [07:36]

• Francois Labbe: "If President Trump decides to impose this 20% tariff... we will go back to the 2019 situation where the market was almost, you know, stopped." [08:32]

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This comprehensive summary encapsulates the key discussions and insights presented in the episode, providing listeners with a clear understanding of the current economic challenges posed by international tariffs and their broader implications.

Transcript

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[Liana Byrne]

Hello, this is the Marketplace Morning Report and we're live from the BBC World Service. I'm Liana Byrne. So, Japan's overall exports dropped in May, the first decline in eight months, as Asia' feels the squeeze from President Trump's tariffs. Tokyo is pushing hard for a trade deal and automakers are taking the brunt of the hit. The BBC's Katie Silver has the story.

[Katie Silver]

Selling Japanese cars abroad is a fundamental part of the country's economy. Last year, the US spent about $40 billion importing Japanese cars, including Toyota, Honda and Nissan vehicles. It was about a third of what Americans spent overall on Japanese goods. Now, though, these cars are subject to a 25% tariff, which other than Britain has hit the automotive industry across the it's contributed to Japanese exports to the US dropping by more than 11% in the month of May compared to the same period a year earlier. The tariffs are a huge blow to Japan's manufacturing sector and something Prime Minister Shigeru Shiba is desperately trying to tackle. There was hope some progress may have been made when he met President Trump at the G7 summit in Canada. But as Shiba said, some disagreements persisted and despite negotiating until the last minute, he walked away empty handed. Japan also faces a 24% so called reciprocal tariff rate that's due to start July 9th unless a last minute deal can be reached.

[Liana Byrne]

Katie Silver there. Now let's do the numbers. Oil prices dipped slightly today after a 4% jump on Tuesday driven by fears of supply disruption from the Israel Iran conflict. Brent is trading just above $76 a barrel. Markets are watching both the risk to shipping through the Strait of Hormuz and today's Fed decision. Meanwhile, a Spanish government report says April's massive blackout across Spain and Portugal was caused by too much electrical voltage in the network that spiraled into a chain reaction, exposing weaknesses in the region's power grid. And flights to and from Bali were cancelled or delayed during peak tour season after a volcano erupted, sending ash more than six miles into the air, disrupting travel. Once dubbed Russia's Davos, the St. Petersburg International Economic Forum opens today, but geopolitics will likely steal the spotlight. Moscow's using the event to showcase economic resilience and claim it's not isolated over the war in Ukraine. The BBC's C. Rosenberg is there.

[Steve Rosenberg]

The organizers of this year's forum maintain that representatives of 140 countries and territories will be taking part. And the Russian authorities will almost certainly try to use this event to demonstrate that attempts to isolate Russia on the world stage have failed. Now one thing I'm going to be looking for this week is to see whether there are more American companies here than in recent years. This is an economic forum, but geopolitics is never far away here. So we'll be looking for comments this week from President Putin on Ukraine, on events in the Middle east, on international security and on relations with Washington.

[Liana Byrne]

Steve Rosenberg with that report. Let's return to President Trump's tariffs because negotiations are still ongoing over what tariff rate will be applied to European Union exports to the US Yesterday we looked at the impact on Spain's food industry. Today we're heading to the vineyards of France. The BBC's John Laurenson reports from Burgundy.

[Cecile Tremblay]

We'Re going down in the cellar now to discover some wines of the.

[Francois Labbe]

Ah, it's a great smell here. Monks planted vines in Burgundy a thousand years ago. Bourgogne, as it's called in French, produces some of the most prestigious and expensive wine in the world. Among the oak barrels and bottles with labels weathered by mould and age. Winemaker Cecile Tremblay rattles off names.

[Cecile Tremblay]

I do some Nuit, St Georges, Vendre, Manet et Chausso, Grand Cru, Clove Jo, Grand Cru, Chapelle, Chamartin.

[Francois Labbe]

Producers like her export a lot to the States, so the Trump tariffs could be damaging.

[Cecile Tremblay]

For United States, for example, it's around 10% of the production, so it's a big production for me.

[Francois Labbe]

Can I ask you if you're worried?

[Cecile Tremblay]

Yes, sure. As everybody.

[Francois Labbe]

And that was all Madame Tremblay would say about the Trump tariffs. French winemakers are walking on eggs at the moment, fearful of saying anything that might aggravate the situation. Perhaps the vintners representatives would be more forthcoming. I'll get in my car and drive over to one of her neighbours, Francois Labbe. He's the president of the Burgundy Wine Interprofessional Office, which represents this region's three and a half thousand winemakers.

On the palate, a red cherry. You know, those big red juicy cherries that you crack when you bite.

He pours me out some of the 2023 vintage from the vats down in his cellar. For Burgundy, he says, the American market is worth $400 million.

Let's say that we export 130 million bottles. US take 25% of that. The US is the largest export market for the whole region. Definitely.

And while French wines and spirits exports dropped 4% last year, overall sales of Burgundy wines to the US rose by 16%. They've never been so high. The Americans appreciate the whites, like Chablis and sparkling Cremen. They also go for the reds, which are lower in alcohol. The most American red wine. Francois says the most recent period of tariffs on wine saw a 50% drop in exports to the United States.

We have in memory the tough situation we were in from October 2019 until April 2021, with a 25% tax due to an aeronautic conflict between France and the US. It really did affect our sales to the US.

So what could be the impact of the 10% duties in place now?

Some shippers and importers are going to Coupe La poirondeux, you know, 10% tax. So I take 5% on my margin, on my side and you take 5% on your margin just not to stop the flow of the export of your products.

What would the impact be if after the end of this three month suspension, President Trump decides to impose this 20% tariff, as he threatened to do, we.

Will go back to the 2019 situation where the market was almost, you know, stopped.

For French wine exports in general, it could be even worse because last time champagne and wine stronger than 14 degrees of alcohol were excluded. This time, it's across the board. In Nuit St Georges, France, I'm the BBC's Jon Lorenson for Marketplace.

[Liana Byrne]

And that's it from the Marketplace Morning Report from the BBC World Service, I'm Lianna Byrne. Have a great day and thanks so much for listening.

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