^{Source: Kyodo News}

Japan Feels the Burn from Tariffs as U.S.-Bound Exports Fall for the First Time in 2024

Japan’s export-driven economy hit a new stumbling block in April, as fresh government data revealed that shipments to the United States—its second-largest trading partner—fell by 1.8% year-on-year, marking the first decline of 2024. This drop ends a steady run of growth since December 2023 and signals deepening fallout from U.S. trade tariffs under former President Donald Trump’s economic policies.

April Export Numbers: A Mixed Bag

Overall, Japan’s exports rose by 2% in April compared to the same month last year, aligning with forecasts from a Reuters poll of economists. But that increase was the slowest since October 2023, and reflects growing uncertainty in international trade. In contrast, imports fell 2.2%, outperforming analysts’ expectations of a 4.5% decline, indicating weaker domestic demand.

Shipments of transport equipment, including automobiles and parts, fell by 4.1% in value to the U.S.—a blow considering that vehicles account for over 28% of Japan’s total exports to the American market in 2024, according to customs data.

Trade Surplus Shrinks as Tariffs Bite

Japan’s trade surplus with the U.S. dropped to 780.6 billion yen (approx. $5.4 billion) in April, down from 846.9 billion yen in March. While Japan continues to post a surplus with the U.S., the declining trend reflects the rising cost of tariffs and shipping hurdles.

The key driver of this contraction? Trump-era tariffs. Japan currently faces:

• 25% tariffs on auto, steel, and aluminum exports
• 10% baseline tariffs applied to a broad range of countries
• “Reciprocal tariffs” of up to 24%, temporarily suspended for 90 days starting April 9

These levies have created instability for exporters trying to plan long-term contracts or supply chains.

GDP Contracts, Trade Woes Mount

Japan’s economy shrank at an annualized rate of 0.7% in Q1 2024, dragged down by stagnant private consumption and sluggish exports, according to preliminary GDP figures from the Cabinet Office.

“Net exports will remain a drag on GDP growth in Q2,” said Abhijit Surya, senior economist at Capital Economics. He predicted that Japan’s central bank might delay its next interest rate hike until October, pending clarity on U.S. tariff policies.

Industry on Edge: Uncertainty Clouds Future Deals

Manufacturers in Japan are bracing for turbulence. “Trade policy flip-flops create whiplash through the supply chain and economy,” said Stefan Angrick, head of Japan and frontier markets economics at Moody’s Analytics.

Despite being the first country to initiate bilateral trade talks with the U.S., Japan’s negotiations appear stalled. On Tuesday, Ryosei Akazawa, Japan’s top trade envoy, reaffirmed Tokyo’s demand for the removal of U.S. tariffs, asserting that Japan “will not rush into a deal that undermines its economic interests.”

Looking Ahead: Can Japan Reclaim Stability?

Even if a temporary suspension of tariffs is extended, experts agree that Japan is unlikely to regain the pre-Trump trading terms any time soon. The shifting landscape of global protectionism continues to impact Japan’s heavily export-reliant economy, especially in automotive and manufacturing sectors.

With trade at a crossroads, Japan’s next steps in diplomacy and monetary policy will be critical to weathering the storm and reviving economic momentum in the second half of 2024.