Illustration: Chen Xia/GT
Japan’s export-reliant economy is facing mounting challenges as its shipments to the US have reportedly declined for the fourth consecutive month, marking a noteworthy downturn in its trade performance. This persistent drop in exports to one of its largest trading partners led to the steepest fall in Japan’s overall export figures in more than four years as of July, raising concerns about the resilience of Japan’s economic recovery.
Japan is an important US partner in several areas, particularly security and trade. However, when the US wields tariffs as a tool, this long-standing close relationship has not resulted in the preferential treatment for Japan that some might have expected. On the contrary, US tariffs have negatively affected Japan’s export sector, causing a significant drop in its exports to the US.
According to official data from Japan, exports to the US dropped by 10.1 percent in July, with automobile exports experiencing a significant decrease of 28.4 percent, as reported by the Xinhua News Agency on Wednesday. This downturn contributed to a 2.6 percent decline in Japan’s overall exports in July, marking the third consecutive monthly year-on-year decline.
The development of Japan’s export industries has long been important for its economic growth. Therefore, the recent consecutive declines in exports have raised concerns about the outlook for the Japanese economy.
The Nikkei 225 Index lost 1.5 percent to 42,888.55 at the close on Wednesday. Weak export data is considered one of the factors affecting the stock market, according to media reports.
Earlier this month, Japan cut its GDP growth forecast for the current fiscal year. According to Xinhua, Japan’s Cabinet Office revised its real growth projection for fiscal year 2025 to 0.7 percent, down from the previous forecast of 1.2 percent. The downgrade partly reflects a darkening global economic outlook as a result of US tariff policies.
Politicians in Washington are surely aware of the potential impact that tariffs could have on Japanese exports and the broader Japanese economy, yet they did not flinch when slapping those tariffs on its so-called ally. A widely reported and cited statistic is that automobiles and parts account for about one-third of Japan’s exports to the US.
However, according to Bloomberg, the US imposed a 25 percent tariff on imports of Japanese cars and auto parts. Although the levies on cars and broad-based goods might be assessed at 15 percent under a trade deal reached in late July, this rate could still affect Japan’s automobile exports to the US, according to reports.
Japan is among the global leaders in motor vehicle manufacturing and is home to a number of internationally renowned automakers. This naturally creates competition with the US, which seems reluctant to freely share its lucrative domestic auto market with Japan, reflecting an “America First” policy stance.
According to CNBC, senior economist Masato Koike at Sompo Institute Plus said in an August 14 note that there was a possibility that Japan could enter a recession, depending on the magnitude of the impact of tariffs. This reflects growing concerns within Japan about the country’s economic development.
It is clear that Japan’s economy will bear significant costs as the US continues to weaponize tariffs. The fact that Japan is considered an ally does not exempt it from being targeted by US tariff policies. On the contrary, Japan’s long-standing reliance on the US market might be leveraged to pressure Japan into making concessions that serve the “America First” agenda, potentially at the expense of its own economic interests.
The ongoing decline in Japan’s exports to the US highlights the growing economic damages American tariffs inflict on other countries, including its so-called allies. This impact, which extends beyond Japan to include other US allies, could potentially grow, given the unpredictable and unilateral nature of US tariff policies.