The Potential Impact of Tariffs on Asian Automakers Like Honda and Nissan

The election of President-elect Donald Trump has brought with it many promises and policy changes. One of the most discussed topics has been the potential implementation of tariffs on imported goods, including vehicles from countries like Japan. This article will explore the potential impact of these tariffs on Asian automakers, with a particular focus on Honda and Nissan, and why it might be wise for these companies to continue manufacturing in the USA.

The Current Situation: No Tariff on Japanese Cars

Despite the attention given to potential tariffs, it is unlikely that President-elect Donald Trump would implement high tariffs on Japanese cars. This is because the vast majority of Honda and Nissan models produced in the USA are already exempt from such tariffs. For instance:

Honda

Honda produces popular models such as the Accord, Civic, CR-V, Pilot, Odyssey, and Ridgeline in Ohio and Alabama. These plants are already operating under the assumption that they are serving the domestic market, thereby avoiding any additional tariffs. Trump's focus on "buy American" policies may also incentivize the continued operation of these facilities.

Toyota

Toyota also manufactures several popular models in the USA. These include the Camry, RAV4, Highlander, Tacoma, Tundra, and Sequoia. The company operates plants in Texas, Indiana, and Kentucky, ensuring that many of its vehicles are produced close to their domestic market. While these plants face similar issues as Honda, the strategy of producing in the USA could mitigate any potential negative impacts of tariffs.

Nissan

Nissan is another major Asian automaker with significant operations in the USA. They produce the Altima, Rogue, Pathfinder, Titan, and Frontier in Tennessee and Mississippi. These plants are integral to the company's strategy and serve to reduce the impact of tariffs. By maintaining a strong domestic presence, Nissan can protect its market share and employment in the USA.

The Worries: Potential Tariffs on Imported Cars

While existing plants are safe, there is a risk that Trump might impose tariffs on imported Asian cars. This could have significant implications, particularly if such tariffs were to be applied to models built in Japan and subsequently imported into the USA. Here are the potential consequences:

Revenue Impact on US Plants

If tariffs were applied to imported Asian cars, it could result in reduced sales for these companies. Higher prices could deter consumers from purchasing imported vehicles, leading to a decrease in overall sales. This could have a ripple effect on the employment and economic impact of these plants. For instance, Subaru, which manufactures the Legacy, Outback, and Forester in Indiana, could also face challenges if tariffs were to be implemented.

Employment Impact

The primary concern is the potential loss of jobs. Asian automakers have invested heavily in US plants, and any increased tariffs could lead to job losses. In addition to the manufacturing plants, these companies also support thousands of jobs in ancillary industries such as supply chain, logistics, and service. The loss of these jobs could have a significant economic impact on local communities.

Conclusion: A Wiser Policy for the USA

The implementation of tariffs on Japanese cars not built in the USA would be a suboptimal policy for several reasons. It would not only hurt the USA's economy but also violate the spirit of global trade alliances. While the rhetoric around "buy American" has been an integral part of Trump's campaign, it is critical to consider the long-term economic ramifications of such policies. The loss of jobs and the price increase might not align with Trump's promise to improve the lives of ordinary Americans.

For Asian automakers, the focus should be on expanding their domestic presence in the USA. This not only provides protection against potential tariffs but also aligns with the broader goals of reducing imports and supporting the domestic industry. By doing so, these companies can contribute to a more resilient domestic market and support the jobs of thousands of Americans.

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