Japan's trade surplus shrinks 31% in June as exports to US plunge
Ideas
Exports to the US might have decreased due to an increase in car prices, an decrease in demand for cars and any number of variables related to the tariff situation in the US.
Whether positive or negative depending on what side of the fence you are sitting on, Japan's streak of trade surpluses might be ending, which could be a negative for the Japanese economy in the future.
As the trade deal between Japan and the US gets finalized maybe it will bring some certainty to the markets and to Japanese and US companies as when it does get finalized they can now plan for the future.
Most likely as the 25 percent tariff has taken effect Japanese car sales are down in the US along with demand for Japanese cars as US consumers might be evaluating their new car buying options more closely now.
Just because there are tariffs on most foreign imported cars now doesn't mean US cars are going to be cheaper as most US made cars, like all cars globally these days, have many car parts that are not made in the US and might have tariffs of the car parts too.
And then there is the steel situation or aluminum situation which cars might be made of and maybe some might be foreign steel and or foreign aluminum which has a tariff on them too, which will also increase the price of US cars.
Japan is a resource-poor country which means it has to import much of what it needs and it prone to changes in global markets which can impact the prices Japan has to pay for imports.
You would think Japan might have some kind of technological edge in manufacturing mobile phones but it seems Japan gave up that position many years ago, and the I phone is the most popular phone in the Japanese market, with Samsung increasing market share every year and now the Chinese with their superior technological advantage are moving quickly in Japan, while Japanese mobile phone companies seem to losing market share every year.
Unfortunately its only natural that the trade surplus with the US would begin to decrease as demand for Japanese cars are most likely decreasing every month now.
US imports to Japan are not affected by the tariff situation as Japan has not place a tariff on US imports and again, Japan is resource-poor country and putting a tariff, which is like a tax on US products will get passed on to Japanese consumers and make the current inflation situation even worse than it already is.
It has been suggested that Toyota and other Japanese companies are shipping less expensive Japanese made cars to the US and maybe even increasing the volume being shipped hoping that the volume increase will overshadow the loss from more expensive Japanese made cars.
Japanese car manufacturers might be absorbing the cost of the tariffs now, but how long can they absorb the costs before it starts to affect their profits margins and can it be sustainable for Japanese companies to do it in the long run.
Eventually Japanese manufacturers might have to tell their US sellers we can't continue to absorb the costs and you will need to begin to absorb some of the cost which might increase the price of a Japanese car in the US
Yes, most likely the trend is likely to fade as Japanese car makers will begin to realize they can't keep absorbing the cost of the tariff and eventually need to pass-on the tariff cost to the next in the supply chain, which of course could be the final customer in the US.
Japanese companies have always focused on price competitiveness as their main competitors are South Korean cars, maybe some Chinese cars now, and of course EU made cars.
Almost all car manufacturers use foreign car parts and its now a global situation and many of them come from Japan or even South Korea these days.
Exports of car parts from Japan might have decreased so the car repair companies or companies that make cars in the US have to get their car parts from somewhere so someone might be benefiting from the US tariff situation.
China is in a challenging situation at this time and its economy, while still robust, is not the economy it was ten years ago.
Trade surpluses increase and decrease every year and are never exactly linear or always increasing as there are many variables which can impact trade with other countries.
However, trade with the EU has been another challenging situation like China as the EU just doesn't seem to be the way it was before. The Ukraine war could be part of the problem but economies like Germany too are having their own trade issues at this time.
If Japan wants to offset the loss of revenue with trade from the US it will need to improve its trade situation with China and especially the EU or even improve its trade with the rest of Asia including South Korea, but even South Korea at this time is having challenges with the US tariff situation.
Have a nice day!
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