25% US tariffs hit Japanese aircraft and construction machinery hard

If the US tax rate on Japan is raised to 25%, aircraft parts and construction machinery, which have a high export ratio to the US, will be hit hard. The Japanese government is ready to continue negotiations and demand a readjustment of the tax rate.

Trade statistics from the Japanese Ministry of Finance show that Japan’s exports in 2024 will be 107.0879 trillion yen. Exports to the United States will be 21.2947 trillion yen, accounting for about 20% of the total. Products with a large amount of money are not just automobile-related products that are subject to a 25% industry tariff.

The total export volume, including aircraft parts, is 307.9 billion yen, of which 76.5% is exported to the United States. IHI produces parts for civil aviation engines manufactured by General Electric (GE) and Pratt & Whitney (P&W) in the United States.

Each project distributes profits and risks according to the proportion of investment. American companies, as importers bearing tariffs, may also ask Japan to bear tariffs.

Regarding aircraft and parts, the Trump administration is also considering imposing industry tariffs. There is a possibility of additional burdens under other frameworks other than reciprocal tariffs.

The proportion of Japan’s construction and mining machinery exports to the United States also exceeds 50%. Komatsu, a construction machinery manufacturer, has 30% of its sales in North America. In addition to passing on the tariff burden to prices in the form of “surcharges”, the supply chain will also be adjusted.

The ratio of metal processing machinery such as machine tools to the United States is 23.4%. Statistics from the Japan Machine Tool Builders’ Association (JKU) show that US orders account for about 20% of the total orders of Japanese manufacturers. Large companies such as DMG Mori Seiki and Makino Milling Machine Co., Ltd. have proposed a policy of passing on tariff costs to customers as surcharges.

For Japan, the United States is the largest export destination, so the imposition of tariffs will put pressure on a wide range of industries. Takeshi Niinami, the representative secretary of the Keidanren, said that the new tax rate is “not a level that can be absorbed by itself,” expressing a sense of crisis.

Yoshinobu Tsutsui, chairman of Japan’s largest economic group Keidanren, pointed out at a press conference on July 7 that “if the additional tariff rate is applied, it will have a very huge impact.” He also expressed concern that “the predictability and profitability of Japanese companies’ investment strategies will be widely affected in the future.”

According to estimates by Mizuho Research & Technology, a 10% reciprocal tariff and tariffs on industries such as automobiles will reduce Japan’s real GDP (gross domestic product) by 0.2%. If the reciprocal tariff is raised to 25%, the downward impact on GDP will expand to 0.4%.

In April, Teikoku Credit Bureau predicted that the number of bankruptcies in Japan in 2025 would increase by 5% from the previous year to 10,574. At that time, it was envisioned that the tariff would increase to 24% from July. Chief researcher Tsuyoshi Kubota believes that if it is raised to 25%, the number of bankruptcies “is likely to increase further.”