Tariffs on Japanese exports of cars and other industrial products to Europe will be abolished in stages after the Japan-EU economic partnership agreement (EPA) takes effect. While this is welcomed by the auto industry, many think that the impact will be limited since many companies have already shifted to local production.
Automaker executives welcomed the signing of the EPA. Subaru President Tomomi Nakamura noted that “this will be a tailwind (for exports),” while Suzuki President Toshihiro Suzuki said: “We hope they keep promoting free trade.”
Japanese auto exports to the EU countries had dropped from 810,000 units in 2008 to less than 400,000 in 2013 as a result of increased local production. While there has been some increase subsequently, the number was still only 640,000 in 2017. During this period, South Korean makers have increased their market share in light of the ROK’s free trade agreement (FTA) with the EU, which eliminated tariffs on South Korean cars. Therefore, there are high hopes in the Japanese auto industry that “the market environment in Europe will improve if we are operating under the same tariff conditions with our rivals,” according to an official of a major automaker.
There is widespread concern in the industry about the Trump administration’s plan to slap additional tariffs on cars, so there is also the opinion that “with uncertainty in exports to the U.S., a strategy to take advantage of the EPA to increase exports to Europe is also conceivable,” according to a major car manufacturer.
However, Japanese makers have already been increasing local production in Europe to avert the impact of yen appreciation and other factors. For example, Nissan Motor already has a high local production ratio. An executive of a major automaker said “the abolition of tariffs alone will not result in a rapid surge in exports; the effect will be limited.”