US tariffs still spell big pain for Japan’s small carmakers

President Donald J. Trump gave Japanese automakers some relief by cutting his high US tariffs on their vehicles, but the reduced levies still mean big pain for Japan’s smaller car companies, which will stay under pressure in the crucial market.

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After months of diplomacy, Mr. Trump signed an order on Thursday cutting US tariffs on imported Japanese autos to 15% from 27.5%, a rare bit of good news for Japan’s critical industry, which relies on the United States as its top market.

Smaller automakers Mitsubishi Motors, Mazda and Subaru are less able to absorb the tariff shock than bigger rivals Toyota and Honda.

Mitsubishi, Mazda and Subaru, big exporters to the US, may need to keep raising prices — adding to an inflationary squeeze on US consumers. Eventually the companies may need to pursue closer tie-ups with rivals, stop offering some models in the US or even pull back from the market, analysts say.

Mr. Trump's 15% tariff on Japanese cars is still six times what the rate was, at 2.5%, before he slapped levies on autos in April.

Mitsubishi cut its profit forecast by nearly a third last week, and Maada’s exports from Mexico have sunk by more than half since Mr. Trump imposed auto tariffs.

The lower rates, which will take effect within a week or two, according to Japan’s top tariff negotiator, do not apply to cars shipped to the US from the key production hubs of Mexico and Canada. That means Japanese automakers could still face higher tariffs on vehicles from these countries, though cars qualified under a North American trade pact will be taxed only on their non-US content.