The U.S.’s decision to raise tariffs on $200 billion worth of Chinese goods includes auto parts, machinery parts, and some textiles. Hiroaki Nakanishi, chairman of the Japan Business Federation (Keidanren) told reporters on May 7, “If tariffs are actually raised, there will be a significant impact.”
A senior official of major machine tool maker Toshiba Machine voices concern that the company’s “clients’ capital investment (in China) will be suspended if this situation continues.” Komatsu CEO Hiroyuki Ogawa says, “The key is whether or not the sense of slowdown in the Chinese economy grows stronger.”
Auto parts, which were also affected by the previous sanctions, will be hit hard. Chinese exports of auto parts to the U.S. stood at $10. 9 billion (approx. 1.22 trillion yen) in 2018, three times higher than a decade earlier. The production system [for auto parts] is well established in China.
Antenna parts supplier Yokowo relocated most of its production functions from China to Vietnam in March. The company exports 70% of its parts made in China to the U.S. and other countries, so the additional tariffs increased the company’s costs by 350 million yen during the period from August 2018 to March 2019. A Yokowo official says, “We’ve been able to reduce the additional cost by about 100 million yen by relocating production.”
G-Tekt Corporation in April began exporting its dies for auto body components to the U.S. from Japan instead of China. Akebono Brake Industry used to export brake pads worth 300 million yen every year from China to the U.S., but it began procuring all parts in the U.S. in March.
When the U.S. government previously imposed additional tariffs of 25% on $50 billion worth of the Chinese imports, it accepted requests for “exceptions” from the additional tariffs.
Major automotive lighting manufacturer Stanley Electric had one of its dies exempted from the additional tariffs. The company began locally procuring some parts in the U.S. instead of importing them from China and negotiating with automakers to increase the prices of parts that are difficult to procure in the U.S.
A spokesperson for Fast Retailing, operator of the Uniqlo clothing chain, said: “I’ve heard the number of targeted items will be increased in addition to tariff rates being raised. We’re watching closely to see how the impact spreads.” (Slightly abridged)