TOKYO -- Japanese automakers are exploring all options to help their country reduce its trade imbalance with the U.S. as Tokyo continues efforts to negotiate a trade deal with the U.S. amid a looming July 9 deadline for the imposition of President Donald Trump's "reciprocal" tariffs.
Among floated ideas: Toyota Motor importing cars it makes in the U.S. back to Japan or offering American brands at its own dealerships in Japan. A Japanese dealership tends to offer only one as opposed to multiple carmakers or brands handled by typical American dealerships.
Simultaneously, Japanese automakers are bracing for the continuation of the 25% automotive tariffs, which Trump imposed on foreign cars on April 3, by raising prices of the cars they sell in the U.S. or trying to increase local production further.
This would not be the first time for Toyota to sell American brands in Japan. In the 1990s, Toyota sold Chevrolet Cavalier cars made by General Motors and the Scepter station wagon made in the U.S. by the Japanese automaker.
Trump said last week that Washington started sending letters to inform countries what tariff rates they will face on imports to the U.S. "I'm not sure we're going to make a deal ... with Japan, they're very tough," Trump said, hinting at the possibility of imposing a reciprocal tax of as high as 35% on Japanese imports. The original rate to Japan was 24%.
Japanese Prime Minister Shigeru Ishiba, however, is showing no indication of compromise, telling reporters, "We must protect [our] national interests ... Japan is the world's largest investor country in the U.S. ... It's different from other countries."
Ishiba added that bilateral trade should be built around mutual investment as opposed to mutual tariffs, citing Nippon Steel's plans to invest in U.S. Steel as an example. Japan keeps its stance of demanding exemption from automotive tariffs.
Ryutaro Kono, chief Japan economist at BNP Paribas, said in a report last week that the biggest concern is the automobile tariffs. "Any proposal that keeps auto tariffs at 25% or offers no low-tariff quota is unlikely to be acceptable to the Japanese government," he wrote.
Toyota Chairman Akio Toyoda spoke with Ishiba at a meeting on May 1. Toyota Executive Vice President Hiroki Nakajima, who was also at the meeting, mentioned it in a video on the company's website.
"[Toyota] produces lots of cars in the U.S.," Nakajima said. "If the trade deficit is a problem, we explained that we won't rule out the possibility of bringing Toyota cars made in the U.S. into Japan."
He added, "If an American car maker brings its cars into Japan, I think that using Toyota's sales network to sell its cars is an option." According to him, the number of locations selling American cars is 163 in Japan, while for European vehicles it is 1,930. Toyota, meanwhile, has more than 4,000 locations.
"It was also mentioned at the time [when Toyoda and Ishiba spoke]," Nakajima said. "We are not saying that we will do so, but we did discuss the possibility of considering it."
Trump has long complained about American cars' limited presence in Japan. According to the Japan Automobile Importers Association, Jeep's share was 2.51% of total imported cars registered from January to June this year in Japan. Cadillac was at 0.16% and Chevrolet was at 0.11% in the same period.
Even though there have been no tariffs in Japan on imported cars since 1978, Trump insists that there are non-tariff barriers against American vehicles. In an earlier round of negotiations with the Trump Administration, the Japanese side is believed to have considered facilitating the approval process for U.S.-made cars. But it is not clear where the idea stands now.
Nakajima stressed that some localization is necessary if foreign brands want broad acceptance in the Japanese market. First, the country has a lot of narrow streets and cars need to be of a size to navigate them. Second, since road accidents in Japan tend to involve cars hitting pedestrians as opposed to cars crashing into each other, Japanese product regulations tend to focus on whether cars are designed to reduce harm to pedestrians in road accidents as opposed to how well they are designed to protect the driver.
A sensor-activated automatic brake system is also required for cars in Japan following a surge in incidents caused by older drivers mistakenly stepping on the accelerator when they should have stepped on the brake.
Japanese automakers are keeping a close eye on the negotiations as the U.S. is their key market, which accounts for around 30% of annual automobile exports from Japan.
Some Japanese makers have begun to reflect tariff impacts in their retail sticker prices in the U.S.
Toyota decided to increase car prices by an average of $270 from this month. Jeffrey Guyton, CFO of Mazda Motor said at the company's annual shareholders meeting last month that the company is exploring raising vehicle prices in the U.S. Mazda sold 435,000 vehicles there, or over 30% of its total sales, in the fiscal year ended March 2025.
On the other hand, Japanese manufacturers plan to increase the number of vehicles they make locally in the U.S. Guyton, for instance, said that his company wants to produce vehicles in a factory in the state of Alabama to avoid the tariffs.
Subaru's car sales in the U.S. accounted for 70% of its total in the fiscal year ended March 2025. It is investing 40 billion yen ($276 million) to expand production in the U.S. While Honda is considering increasing its U.S. output by relocating production from Mexico and Canada, the company is also exploring the possibility of business collaboration with Nissan Motor in the U.S.
Despite Trump's deadline, Kono at BNP Paribas projects that negotiation between Japan and the U.S. will conclude after Japan's upper house parliamentary election, which will be held on July 20.
"A scenario I envision is that mutual tariffs will remain at 10%, and the automobile tariff will be reduced to around 17.5%," he said. But he also suggested that there are no guarantees of such an outcome. "Japan alone may face a tariff increase," he said.
