If the United States were to impose additional tariffs on cars imported from Japan, what would happen to the price of Japanese cars sold in United States, and how might this tariff impact relations with Japan?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

If the United States were to impose additional tariffs on cars imported from Japan, the price of the Japanese cars that are sold in the US would increase. A tariff is a tax imposed by one country on a good or service from another country, and each tax on a...

See
This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Sign Up for 48 Hours Free Access

If the United States were to impose additional tariffs on cars imported from Japan, the price of the Japanese cars that are sold in the US would increase. A tariff is a tax imposed by one country on a good or service from another country, and each tax on a good or service makes the consumer's price go up while the seller's price goes down.

In this context, it's notable to mention that a big percentage (69%) of Japanese cars sold in the US are actually manufactured in the US, while 31% are manufactured in Japan and imported to the US. Thus, imposing additional tariffs on cars imported from Japan will greatly affect the Japanese car industry (one on of the country's largest and most important industries), especially the smaller Japanese automotive companies, as the increase in cost will result with even more costs and cause big financial problems for many.

The additional tariffs might also lower the demand for Japanese cars, which in turn might increase the demand of American cars, and the increase in this demand will result in an increase in the price of American cars as well.

In 2018, American president Donald Trump and his administration actually considered imposing additional tariffs on cars imported from Japan, and the second article linked below explains the impact of such a move in great detail. According to the article,

"The impact (of the tariffs) would be huge," said Nobuyuki Nakatsuka, chief economist at Mitsubishi UFJ Research and Consulting.

According to the Japan Automobile Manufacturers Association, the country exported about 1.74 million cars in 2017 while the Finance Ministry's data shows that the value of the exported vehicles and parts that year totaled ¥5.5 trillion. So additional U.S. auto tariffs—reportedly 20 percent or 25 percent—would cost more than ¥1 trillion.

"If the automakers do not cover all the cost increases by themselves, the burden would be on the U.S. consumers and companies. That could slash the volume of exports," said Nakatsuka.

The additional tariffs, therefore, will negatively affect Japan's economy as well, which might worsen relations between America and Japan.

Last Updated by eNotes Editorial on