By Kosaku Narioka

Japanese auto stocks fell sharply after new U.S. tariffs against Mexico, Canada and China raised concerns about their U.S. sales of cars made in the North American trading partners and a further escalation in trade conflicts.

Shares in Honda Motor were recently 6.7% lower on Monday. Nissan Motor slumped 6.0% and Toyota Motor dropped 5.3%.

The White House on Saturday announced a wave of tariffs against Mexico, Canada and China. Effective Tuesday, the U.S. will impose a 25% levy on imports from Mexico and Canada, a 10% tariff on energy products from Canada, and an additional 10% tariff on China.

To sell cars in the U.S., Japanese automakers not only produce them at U.S. plants or import from Japan, but they also make them in Mexico and import to the U.S.

When Trump threatened to impose tariffs of 25% or more on imports from Mexico in November, Shinji Aoyama, Honda's executive vice president, said the impact of the tariffs would be huge if realized. He said Honda produces roughly 200,000 cars in Mexico annually and exports about 80% of those to the U.S.

Aoyama said then that if the new tariffs became permanent, the company would have to consider medium- to long-term options such as relocating production to the U.S. or other countries not subject to the tariffs.

Nissan and Toyota also produce vehicles in Mexico and export some to the U.S.

New tariffs come at an inopportune time, especially for Honda and Nissan, as the two automakers are considering ways to merge their operations. Nissan is in the midst of turnaround efforts to address weak sales in North America and China. It has announced a plan to cut 9,000 jobs globally and reduce its global production capacity by one-fifth.

A senior administration official told reporters Saturday that the duties will be in place until the White House is satisfied that the trading partners have scrubbed out the illicit fentanyl moving into the U.S.

Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said their countries would retaliate against the U.S. moves.

For weeks, U.S. auto sector and other large industries have lobbied Trump for exemptions from the tariffs, warning of higher prices and continentwide supply-chain issues.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

February 02, 2025 23:25 ET (04:25 GMT)

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