This month, the announcement of sweeping 25% tariffs on cars “not made in the U.S.” has sent ripples through the global automotive industry, especially affecting Asian car manufacturers. U.S. President Donald Trump’s decision has put significant pressure on automakers ahead of the implementation of the new duties, which are set to take effect later this week. The move has particularly shaken Japanese and South Korean carmakers, many of whom rely heavily on the U.S. market. Shares in major automakers such as Toyota, Nissan, and Hyundai have taken a hit, reflecting the deep concern over how these tariffs will affect their operations. Toyota, for example, saw its stock fall by 9.4% over the span of just three trading days after the announcement. Nissan experienced a similar downturn, with its shares dropping by 9.3%, while South Korea's Hyundai lost 11.2% of its stock value.
According to Vivek Vaidya, the global client leader for mobility at research firm Frost & Sullivan, Toyota is likely to feel the most significant impact from these tariffs, given its massive U.S. sales. In fact, the U.S. car marketplace, Carpro, reports that Asian automakers were responsible for six of the top eight automakers by sales volume in 2024. Toyota, the leader in this field, sold nearly 2 million vehicles, surpassing American giants Ford and Chevrolet. Other Asian companies like Honda, Nissan, Hyundai, and Kia also hold significant market shares in the U.S., with Subaru rounding out the top eight. With so much of their revenue derived from North American sales, these automakers are at great risk of being unable to quickly mitigate the financial impacts of these tariffs.
Toyota and Nissan have remained relatively tight-lipped in response to the tariff announcement, providing no immediate comment. However, other companies did not respond to requests for clarification on how they plan to manage the situation. The total value of U.S. automotive imports reached a staggering $474 billion in 2024, with passenger cars alone accounting for $220 billion of that total. South Korea emerged as the second-largest exporter of cars to the U.S. in 2024, with 1.4 million vehicles shipped, just behind Mexico, which exported 2.5 million vehicles. Japan followed closely with 1.3 million vehicles exported. According to Vaidya, the U.S. market is indispensable for Asian carmakers, and these new tariffs are bound to significantly impact major players like Toyota, Nissan, and Hyundai.
While shifting production to the U.S. to avoid these tariffs may seem like a viable solution, Joe McCabe, president of AutoForecast Solutions, argues that moving manufacturing facilities is far from simple. It would require billions of dollars in investment and take years to implement. Additionally, the argument that automakers can simply remove Mexican or Canadian production from their supply chains is unrealistic, says Richard Kaye, a portfolio manager at Comgest. According to Kaye, companies like Toyota and Nissan already have large U.S. production facilities, but they are unlikely to scale these operations quickly enough to offset the impact of the tariffs. “The big question is whether they will absorb the higher costs or pass them onto the consumer,” Kaye stated, acknowledging that the latter option would likely lead to higher prices for U.S. buyers.
Despite the overall negative impact, Kaye notes a bright spot in the form of Suzuki, the Japanese automaker that does not sell cars in the U.S. Suzuki’s stock has performed better than its peers, with a year-to-date gain of 1%, whereas Toyota and Nissan have seen significant declines in stock value. With no direct exposure to the U.S. market, Suzuki is not affected by the newly imposed tariffs. Kaye regards Suzuki as an exceptional company in the automotive space, primarily because it does not rely on the U.S. market and instead focuses on emerging markets like India.
The long-term effects of these tariffs on Asian automakers remain uncertain, but the immediate reactions from the market indicate that companies like Toyota, Nissan, and Hyundai will face significant challenges in the near future. These automakers will need to navigate rising costs, potential price hikes, and a changing global trade environment if they hope to maintain their competitive positions in the U.S. market. As the deadline for the tariffs approaches, it remains to be seen how these companies will respond to the new financial pressures, and whether their strategies will help them weather the storm or exacerbate the challenges they face.
This situation underscores the unpredictable nature of global trade and the complex relationships between the U.S. and foreign automakers. The full impact of the tariffs will likely unfold over the coming months, but for now, the automotive industry is bracing for a challenging period ahead.
