A newly brokered trade agreement between the U.S. and Japan is drawing sharp criticism from America’s auto sector, which says the deal imposes uneven tariff burdens and undercuts vehicles made with high U.S. content. With billions already lost to tariffs this year, carmakers warn that the imbalance could reshape competitiveness across North American production networks.
Tariff Gap Widens Between Japanese and U.S. Vehicles
The bilateral agreement announced on July 22 reduces U.S. import tariffs on Japanese vehicles to 15%, well below the 25% that President Trump had previously floated. Yet that same 25% rate still applies to vehicles made in the U.S. using engines or transmissions sourced from Canada or Mexico, despite their high domestic content. The American Automotive Policy Council, representing Ford, General Motors, and Stellantis, called the move a “bad deal,” pointing out that it favors imports with minimal U.S. inputs over North American-built vehicles.
The United Auto Workers union echoed this sentiment, calling the deal “deeply angering” and warning that it places American manufacturing jobs at risk. “Any agreement that penalizes U.S.-made vehicles while cutting breaks for foreign-built cars undermines the core of our domestic industry,” said AAPC President Matt Blunt in an official statement. This disparity may also conflict with the original spirit of the United States-Mexico-Canada Agreement (USMCA), which sought to reward regional sourcing and domestic content.
Market Access Promises Clash With Structural Realities
While the agreement includes incentives to expand U.S. car sales in Japan, the market remains a challenging one for American brands. U.S. vehicles accounted for less than 1% of Japanese passenger vehicle sales in 2023, hampered by mismatched consumer preferences, right-hand-drive infrastructure, and limited local dealership networks. Japanese consumers favor compact cars, while U.S. automakers have historically focused on larger SUVs and trucks. Even with improved access terms, the likelihood of significant sales gains appears limited without a major product realignment.
Meanwhile, the financial toll from the current tariff regime is mounting. General Motors disclosed on July 21 that trade penalties had shaved $1.1 billion off its second-quarter operating income. Stellantis reported a €300 million ($349 million) hit over the same period, and Ford projects $1.5 billion in tariff-related costs for the full year. The disparity between treatment of Japanese and North American vehicles only sharpens the pressure on U.S. automakers navigating a volatile trade environment.
North America’s Supply Chain Advantage Is Its Next Trade Weapon
As tariff disparities reshape the playing field, the most effective response may not come through trade negotiations but through operational strategy. U.S. automakers still hold a key advantage in their proximity to parts suppliers, skilled labor, and integrated logistics across the North American corridor. Strengthening these regional ties, through deeper supplier collaboration, faster part localization, and more agile final assembly, could offer a buffer against policy swings and import pressure. In the long run, the competitive edge may belong to those who treat the supply chain itself as a strategic asset, not just a cost center.