A sense of alarm has spread among Japanese companies since the Trump administration’s July 10 announcement that it will impose additional tariffs on $200 billion (approximately 22 trillion yen) worth of imports from China. Many companies are operating in China and exporting their products to the U.S. from there, and these companies may be forced to make a drastic review of their production plans. If the U.S.-China trade war heats up, it may come to have a serious impact on Japanese companies, as well.
Ken Okazaki, chief financial officer of Fast Retailing Co. Ltd. which owns Uniqlo, stressed at his July 12 news conference to report the company’s financial results: “We will also consider switching supply sources to manufacturing bases in countries other than China, such as Vietnam.” It is believed that a good portion of Fast Retailing’s exports to the U.S. are manufactured in China. While Okazaki said that at the moment “the impact is limited,” he indicated that production processes will be reviewed in the event of a significant increase in tariffs on goods from China.
The list of additional tariffs announced by the Trump administration on July 10 covers as many as 6,031 items. For this reason, many Japanese companies are now scrambling to collect information. “We are studying the details [of the tariffs], including those affecting our group companies, because of the large number of products affected,” says Hitachi, Inc.
Some companies are already reviewing their production and marketing systems because the U.S. and China imposed additional tariffs on $34 billion worth of each other’s imports on July 6. Mitsubishi Electric is considering switching the procurement of some materials used for manufacturing auto parts at its U.S. plants from China to Thailand and other countries.
Taiheiyo Cement has three production plants in China. Around two-thirds of the cement produced at its Nanjing plant is exported to the U.S. This company says: “The impact will not be zero.” Keihin Corp., a manufacturer of engine control units affiliated with Honda Motor, says that one option is to not plan to export products made in China to the U.S. from now on.
Concerns remain that products driven out of the U.S. and Chinese markets may inundate other markets, causing violent fluctuations. Zensho Holdings, which owns the beef bowl chain “Sukiya” and other brands, depends on China for the procurement of some vegetables and other ingredients. This company is bracing up for possible changes and will “closely watch (developments from now on),” according to its public relations office.
Daiwa Research Institute economist Shunsuke Kobayashi points out that “if China takes steps to guide its currency toward depreciation to compensate for the U.S.’s additional tariffs, the relative competitiveness of Japanese exports may suffer,” warning of possible secondary damage to Japanese companies.