Detroit Thinks Trump's Trade Deal With Japan Makes No Sense
A new trade agreement between the United States and Japan has drawn ire in Detroit. While Japanese automakers celebrate the small win, American automakers say they’re holding the short end of the stick.
Key Points
- The U.S.–Japan trade deal reduces tariffs on Japanese auto imports from 25% to 15%, giving Japanese automakers a pricing advantage in the American market.
- U.S. automakers warn that tariffs on cars from Mexico and Canada—where many domestic vehicles are built—could rise to 30–35%, putting them at a disadvantage despite higher U.S. content.
- General Motors estimates tariffs have cost the company $1.1 billion so far in 2025, with potential losses reaching $5 billion by year-end as global trade tensions escalate.
The freshly negotiated deal slashes tariffs on Japanese vehicles exported to the U.S. from 25 percent to 15 percent. The news immediately boosted Japanese automotive stocks, with Toyota and Mazda seeing jumps of 15 and 17 percent, respectively.
Under the new agreement, cars built in Japan will face significantly lower import tariffs than those assembled in Mexico or Canada— two key manufacturing hubs for the Detroit Three: Ford, General Motors, and Stellantis.
President Trump has threatened to hike tariffs on goods coming from Mexico to 30 percent and from Canada to 35 percent starting August 1. Just when you thought things couldn't get any weirder—if implemented, these rates would be higher than those applied to vehicles imported from Japan, putting North American-built cars at a price disadvantage in their home market—despite containing significantly more American-made content.
In a statement, the White House called the agreement a “historic win for American automakers,” suggesting it would ease barriers for U.S.-built cars trying to enter the Japanese market.
American auto executives are not buying the optimism. One unnamed source told Reuters, “Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American-built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers.”
Meanwhile, European automakers are still stuck in a holding pattern. Ongoing trade talks between the EU and the U.S. have failed to produce a breakthrough, and President Trump recently warned that a 30 percent tariff on goods from the European bloc may be next.
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An experienced automotive storyteller and accomplished photographer known for engaging and insightful content. Michael also brings a wealth of technical knowledge—he was part of the Ford GT program at Multimatic, oversaw a fleet of Audi TCR race cars, ziptied Lamborghini Super Trofeo cars back together, been over the wall during the Rolex 24, and worked in the intense world of IndyCar.
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This is especially troublesome for domestic producers when you consider the huge number of recalls for poor quality/engineering problems.
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