Japan’s April exports slacken as shipments to US fell due to tariffs

Japan recorded a decline in exports in April, as shipments to the US dipped amid the fallout from President Trump’s tariffs, posing a fresh challenge to an already fragile recovery in the world’s fourth-largest economy.

With levies on US-bound goods set to deepen later this year, analysts warn that unless Tokyo persuades Washington to roll back duties, the headwinds could intensify.

Shipments from Japan to the US fell for the first time in four months

According to Ministry of Finance figures, total exports climbed just 2% in April compared with a year earlier, matching market expectations but decelerating from March’s 4% gain. In contrast, shipments to the US, Japan’s largest export market, fell 1.8% year-on-year, marking the first contraction in four months.

Declining demand for cars, steel and ships largely drove that downturn. Automotive exports to the US contracted by 4.8% in value, struck by a stronger yen and lower volumes of premium models.

“Up until March, automakers appeared to front-load US deliveries ahead of the tariff increase. Now that the duties are effective, the trend has reversed.”

Yutaro Suzuki, economist at Daiwa Securities.

While exports to the broader Asian region rose 6%, shipments to China slipped 0.6% amid softer orders for vehicles and electronic components. At the same time, imports fell 2.2% in April, less severe than the 4.5% drop analysts had forecast, resulting in a trade deficit of ¥115.8 billion ($803 million), rather than the anticipated surplus of ¥227.1 billion ($1.6 billion).

Ironically, Japan’s goods trade surplus with the United States widened 14.3% year-on-year to ¥780.6 billion ($5.4 billion), the fourth consecutive monthly increase, as American purchases of Japanese products eased. That growing bilateral surplus may attract further scrutiny from Washington, which has long admonished Tokyo for currency and trade practices it believes give Japan’s exporters an edge.

Against this backdrop, Japan’s chief trade negotiator, Ryosei Akazawa, is slated to hold a third round of discussions in Washington later this week. Yet few observers expect a breakthrough on auto tariffs, which are set to rise to 24% in July unless a deal is struck.

Trump’s administration has already imposed 10% tariffs on a wide range of imports, including Japanese steel and aluminum, and 25% duties on cars, rattling an economy heavily reliant on auto exports to North America.

“Tariffs will exert both direct and indirect downward pressure on exports,” said Masato Koike, senior economist at Sompo Institute Plus. He added that even if bilateral talks yield some tariff relief, Japan cannot escape the spillover effects of a weakening global economy.

Companies in Japan may hold capital spending until the situation improves

The administration’s trade measures may also cause Japanese firms to postpone capital spending, exacerbating the pain for an economy that recorded a contraction in the January–March quarter.

“With manufacturers so deeply integrated into worldwide supply chains, abrupt policy shifts risk a ‘whiplash’ effect that could reverberate through the entire economy.”

Stefan Angrick of Moody’s Analytics.

Currency policy is another flashpoint. Finance Minister Katsunobu Kato is expected to meet his US counterpart, Treasury official Scott Bessent, on the sidelines of a G7 finance ministers’ meeting in Canada this week, where dollar-yen policy is likely to feature prominently.

Trump has accused Japan of deliberately keeping the yen weak to bolster its exports, and a sustained yen appreciation in recent months has already dented the competitiveness of Japanese manufacturers.

The deteriorating outlook has also complicated the Bank of Japan’s plans for monetary tightening. On May 1, the BOJ sharply downgraded its growth and inflation forecasts, citing escalating US tariffs among the key risks to its belief that a moderate recovery was underway.

Capital Economics economist Abhijit Surya now expects net exports to subtract from second-quarter GDP growth and has pushed back his forecast for the BOJ’s next rate hike from July to October.

With an unstable tariff landscape and domestic growth teetering, Japanese policymakers face difficult choices. Already, businesses are feeling the heat with companies saying the US tariff will erode profitability by tens of billions of dollars.

The Japanese companies project that they could suffer as much as $28 billion based on company guidance during the current full-year earnings period.

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