There are forecasts that the actual effect of the Trump administration's negotiation with trading partners to open the U.S. automotive market in exchange for tariff reductions will not be significant.
On the 5th (local time), The New York Times (NYT) reported, citing automotive industry insiders, that "Japan's promise to eliminate trade barriers on U.S. cars will not significantly boost sales." Japan promised to lower reciprocal tariffs from 25% to 15% on the 22nd of last month, in exchange for a $550 billion investment in the U.S., additional rice imports, and the opening of the U.S. automotive and truck market.
President Trump has criticized Japan's unfair safety certification standards for imported cars, stating that it makes it "impossible" for U.S. automotive corporations to sell vehicles in the Japanese market. He argued that Japan is reluctant to accept vehicles that meet U.S. safety standards. Trump has highlighted this issue since his first term and eventually succeeded in using tariffs to eliminate Japan's regulatory barriers.
The problem is that U.S. cars do not suit Japan's road environment. While U.S. automotive corporations primarily produce large sport utility vehicles (SUVs) and trucks, consumers in narrow-road Japan generally prefer compact cars. Japanese brands like Toyota, Honda, and Nissan already offer a variety of compact cars tailored to local consumer preferences.
As a result, U.S. automotive corporations have struggled to establish a presence in the Japanese market for a long time. According to the Japan Automobile Importers Association (JAIA), the market share of U.S. brands, such as Jeep, in the Japanese imported car market is only 2.8%, which is less than one-tenth of the market share of Japanese brands that are reverse-imported from abroad (30.0%). Ford, one of the top three U.S. automotive corporations, withdrew from the Japanese market in 2016 due to low profitability.
Professor Kimura Tsuyoshi of Chuo University in Tokyo noted that "trade barriers were not a major issue for U.S. automotive manufacturers." He pointed out that U.S. corporations have neglected to develop models tailored to the Japanese market, as it is already saturated. Professor Kimura added that "given the demand in the Japanese market, American cars do not fit well," and stated that even if Japan opens its automotive market, the likelihood of U.S. cars selling well is low.
The NYT reported that this tariff negotiation may feel like a déjà vu of the 1990s to the Japanese public. In 1995, the Bill Clinton administration warned that it would impose a 100% tariff on Japanese cars due to Japan's refusal to open its market. At that time, Japan introduced measures to expand accessibility to imported cars, but there was no significant change in the sales volume of U.S. cars in Japan. The sluggish performance of American cars was not simply due to regulations.
The NYT stated, "President Trump announced a trade agreement with Korea last week, securing similar commitments. In exchange for applying the same 15% tariff rate as Japan, Korea agreed to accept more U.S. cars and trucks into its market without tariffs." It added, "However, like Japan, the market share of American car brands in Korea is also very low."