NAGOYA - The signing of a presidential order imposing a 25% tariff on imports from Canada and Mexico by U.S. President Donald Trump has sent shockwaves through the markets, with the Nikkei Stock Average plunging sharply on February 3rd. Concerns are mounting over the impact on the Tokai region’s auto industry, a key pillar of the local economy.
The chairman of a Japanese auto parts manufacturer with operations in Mexico stated that while the tariffs were anticipated, the best course of action now is to “wait for the storm to pass.”
Tokyo’s stock market was highly volatile from the morning session, with a wave of selling triggering further sell-offs. The Nikkei Stock Average dropped over 1,100 yen at one point. The market downturn was fueled by Trump’s signing of the tariff order on February 1st, imposing a 25% duty on imports from Canada and Mexico, along with an additional 10% tariff on Chinese goods. While Trump had vowed to enact high tariffs during his presidential campaign, many had speculated that they might not be implemented, making the announcement all the more shocking.
The auto industry is expected to bear the brunt of the impact. Many Japanese automakers operate manufacturing bases in Mexico and Canada to export vehicles to the U.S.
The president of a Japanese company producing engine plugs and exhaust sensors acknowledged the effect on business, stating, “We are already working on ways to adjust pricing to sustain operations. We had to act immediately, regardless of whether this is a political performance or not.”
As uncertainty looms, shares of Toyota and Nissan plunged, contributing to the Nikkei’s 1,052-yen drop from last week’s close, ending at 38,617 yen.
One leading auto parts manufacturer, which supplies components globally, including to North America, Europe, and Asia, also operates a factory in Mexico. Its chairman noted that while the company had expected Trump to sign the tariff order, the bigger concern is whether additional tariffs could be imposed on other countries, including Japan.
“Right now, our business isn’t severely impacted, but we are wary of the possibility of further tariff hikes,” he said. He emphasized a strategy of patience, saying, “Some might see this as passive, but the best move now is to wait for the storm to pass. It’s unwise to make hasty adjustments.”
Setting up a new factory, including land acquisition, construction, and equipment installation, takes about two years. If another administration takes over and shifts back to freer trade, shutting down an American plant after making such investments would be impractical.
The executive added that their confidence in their products remains firm. “It’s not easy to change components like bearings or engine parts overnight. It requires extensive testing, which takes one to two years. Such changes cannot be made lightly.”
He also questioned whether Trump’s “America First” policy would truly benefit U.S. citizens. “Tariffs will only drive up prices. If free trade is stifled and markets shrink, that’s a loss for humanity.”
With Japanese Prime Minister Ishii set to meet with Trump on February 7th, the issue of tariffs will be a key agenda item. During a parliamentary budget committee session, Ishii indicated plans to assess the impact of the tariff measures, when asked whether he should argue against their implementation.
To prevent Japan from becoming the next target of Trump’s tariff policies, Ishii is expected to highlight Japanese companies’ significant investments in the U.S. during the summit. However, with Trump's unpredictable approach to trade negotiations, the outlook remains uncertain.
A regional business leader expressed deep concern over the situation. “Many companies in the Chubu region have production and procurement bases in both Japan and the U.S. The impact of these tariffs is a serious worry.”
Attention is now on whether Ishii can propose measures that would benefit both countries during his meeting with Trump. “Summits are a clash of national interests. Japan needs to determine what’s most beneficial for its economy and put forth a solid proposal that leads to a win-win outcome,” the business leader added.
Source: Nagoya TV News
