Japanese automakers are ramping up efforts to protect domestic production as U.S. President Donald Trump’s tariffs on Japan-built vehicles squeeze profits and push companies to expand manufacturing in the U.S.

The industry faces an estimated 1.9 trillion yen ($12.9 billion) hit this fiscal year from the levies, raising concerns in Japan where auto plants are deeply tied to local jobs and supply chains, Nikkei reported.

The latest Japan-U.S. trade deal set a 15% tariff on imported cars from Japan to the U.S., down from April’s combined 40% rate after Washington imposed an additional 25% duty on top of existing tariffs.

Honda CFO Eiji Fujimura called the situation a “new normal,” while Toyota, Mazda, and Subaru outlined measures to limit damage. 

Toyota plans to utilize excess U.S. capacity and will construct a new plant in Aichi Prefecture to reinforce its commitment to a domestic production base of 3 million vehicles. 

Mazda and Subaru will boost U.S. output while also cutting costs, redirecting exports to Europe and other markets, and stimulating domestic demand. Mazda CEO Masahiro Moro said that the company is partnering with suppliers to reduce costs and maintain its supply chain operations.

Even as automakers are moving production overseas, domestic factories in Japan are crucial to the economy and employment. The Japan Automobile Manufacturers Association noted the industry supports 5.5 million workers and is urging the government to step in and protect those supply chains.

Regional economies are already feeling the strain. Mazda’s Hiroshima base saw its automotive sector business sentiment index plummet to minus 29 in June, with an even steeper decline expected in the coming months. Gunma prefecture, home to Subaru plants, saw a similar slide.

The tariff hit was evident in the April–June quarter results. Honda’s automotive arm posted a 29.6 billion yen operating loss and expects a 450 billion yen annual impact. 

Toyota lost 63.6 billion yen in North America in the quarter, with a projected full-year tariff cost of 1.4 trillion yen. Mazda, which gets a third of its sales from the U.S., reported a 46 billion yen operating loss and warned it has entered “survival mode.”

On Stocktwits, retail sentiment was ‘neutral’ for both Toyota and Honda and ‘bearish’ for Mazda, with all three seeing ‘low’ message volume.

So far this year, U.S.-listed shares of Toyota are down 0.3%, Honda is up 17.5%, and Mazda is down 2.7%.

($1=148.03 yen)

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