Japan's export growth slows amid US tariffs and global uncertainty

Japan's export growth continued to decelerate in April, as the ongoing US tariff measures weighed heavily on its shipments, particularly to the US, its largest trading partner.

According to official data released by the Ministry of Finance, Japan's total exports grew by just 2 per cent year-on-year, matching analysts' estimates but marking a significant slowdown from March's 4 per cent increase. The slowdown highlights the growing impact of trade tensions between Japan and the US, as well as a fragile global economy.

Exports to the US fell 1.8 per cent in April, marking the first drop since December 2024. The decrease was primarily driven by lower demand for key exports like automobiles, steel, and ships. Exports of motor vehicles to the US saw a sharp 4.8 per cent decline, reflecting the combined effect of a stronger yen and the US tariffs on Japanese cars.

These tariffs, which were introduced in early 2025, include a 25 per cent levy on cars and a 10 per cent baseline tariff on most Japanese goods. The automotive sector, which accounts for a significant portion of Japan's exports to the US, has been particularly hard-hit by these measures.

Rising tariffs cloud economic outlook

Despite some growth in exports to Asia, which rose 6 per cent in April, Japan's overall trade balance swung into a deficit of ¥115.8 billion ($797 million) after recording two consecutive months of surpluses.

The export slowdown comes at a precarious moment for Japan, as the country's economy had already contracted in the first quarter of 2025. The 0.7 per cent annualised contraction in GDP was largely driven by weak private consumption and a slowdown in exports.

The US tariffs are expected to further strain Japan's economic prospects. While Japan has been in negotiations with the US to ease the tariffs, the chances of a significant breakthrough remain slim.

Japan's chief trade negotiator, Ryosei Akazawa, is set to travel to Washington for a third round of talks, but analysts suggest that resolving the tariff dispute will be difficult without substantial concessions from both sides.

Automobile exports, which account for around 28 per cent of Japan's total shipments to the United States, have been particularly vulnerable to tariff hikes. Japan exports about 1.5 million vehicles to the US annually, and the escalating duties have raised concerns among Japanese automakers about the long-term viability of their US market strategy. This uncertainty could also discourage manufacturers from making significant investments, further dampening Japan's economic recovery.

Uncertainties lie ahead

The broader economic implications of these trade challenges are likely to extend beyond exports. Japanese manufacturers, which are deeply integrated into global supply chains, face heightened risks from fluctuating trade policies and tariff uncertainties.

With Japan already grappling with a stagnating domestic economy, any further disruptions to global trade could push the country into a technical recession. The weak export performance has also placed pressure on the Bank of Japan (BOJ), which had hoped to resume its tightening cycle in response to rising inflation and wages. However, the uncertainty surrounding tariffs and their impact on Japan's economy is expected to delay any interest rate hikes.

As Japan faces an uncertain economic future, both domestic policymakers and businesses will need to adapt to the shifting global trade landscape. The resolution of tariff disputes with the US will be crucial, but the broader economic environment will continue to play a significant role in shaping Japan's recovery path.

(With inputs from agencies)