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Reading: Japanese auto sector’s $18bn Mexico guess grows dangerous underneath Trump tariff risk
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Japanese auto sector’s bn Mexico guess grows dangerous underneath Trump tariff risk
The Tycoon Herald > Economy > Japanese auto sector’s $18bn Mexico guess grows dangerous underneath Trump tariff risk
Economy

Japanese auto sector’s $18bn Mexico guess grows dangerous underneath Trump tariff risk

Tycoon Herald
By Tycoon Herald 7 Min Read Published February 26, 2025
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The depth of Japanese corporations’ involvement in Mexico’s auto trade is seen at Ashimori Business’s manufacturing facility on an unlimited industrial park in Guanajuato state, 400km north-west of Mexico Metropolis.

A gaggle of principally feminine staff clad in baseball caps and gloves lean over workstations on the plant, within the heartland of Mexico’s auto trade. They’re assembling tiny plastic and steel components for seatbelt security mechanisms.

Ashimori, a Japanese car-parts producer, arrange the manufacturing facility in 2012, shortly earlier than Mazda started manufacturing at a close-by car meeting plant. The amenities are a part of the Japanese auto trade’s $18bn of funding in Mexico, each in car last meeting and element manufacturing. The choices had been made primarily based on low labour prices and unfettered entry to the US market. The Ashimori staff additionally make airbags, sunglasses and different elements for Honda, Mazda and different huge producers.

But US President Donald Trump’s risk to impose tariffs on imports to the US from Mexico and Canada has left the huge guess on Mexico by Japan’s automotive trade trying newly dangerous. Automakers and their internet of suppliers at the moment are attempting to work out easy methods to undertake any obligatory redrawing of future funding plans or reshaping of provide chains.

Japanese auto sector’s bn Mexico guess grows dangerous underneath Trump tariff risk
Honda, right here demonstrating its clear water motor pumps, arrived within the 2010s after Mexico liberalised its economic system © Jeoffrey Guillemard/Bloomberg

Trump initially stated in early February that he would impose 25 per cent tariffs on all imports from the US’s two instant neighbours. Whereas he then backed down, hours earlier than they had been to take impact, he introduced solely a 30-day reprieve, till March 4. 4 Japanese auto corporations now construct 1.3mn automobiles in Mexico yearly, greater than producers from some other nation.

Any tariffs imposed would have an effect on not solely accomplished automobiles however elements such because the 110,000 tyres that stream from Mexico and Canada into the US each day.

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Nissan chief govt Makoto Uchida stated his firm wanted to be ready in case excessive tariffs had been imposed.

“Perhaps we can transfer the production of these models elsewhere,” he stated of the corporate’s Mexican manufacturing.

The Japan Exterior Commerce Organisation (Jetro) has stated that 4 important Japanese investments in Mexico have already been paused due to the uncertainty. 

Mazda and Honda have joined Nissan in warning they might transfer away from Mexico. Naohisa Komura, president of Plasess, one other Japanese automotive components provider, which got here to Guanajuato state in 2014, stated funding selections would stay frozen till there was extra certainty. 

Nissan chief executive Makoto Uchida
Nissan chief govt Makoto Uchida say his firm must be ready for prime tariffs © Kiyoshi Ota/Bloomberg

“It’s extremely difficult as what Trump says keeps changing,” Komura stated. “Without knowing anything at all, we can’t do anything in terms of business decisions.”

Nissan was the primary Japanese carmaker to arrange in Mexico, when it began constructing automobiles domestically for the home market within the Nineteen Sixties.

Mazda, Honda, Toyota and plenty of suppliers arrived within the 2010s after Mexico liberalised its economic system by signing the North American Free Commerce Deal (Nafta) with the US and Canada in 1992. Tariffs on vehicles had been eliminated by 2008. A renegotiated United States-Mexico-Canada Settlement (USMCA) changed Nafta in 2020.

Figures from Mexico’s nationwide statistics company present that 82 per cent of automobiles produced by Japanese automakers in Mexico final 12 months had been exported.

Mireya Solís, a Japan knowledgeable on the Washington-based Brookings Establishment think-tank, stated the previous investments had been primarily based on the belief international locations would search financial progress by way of unfettered commerce.

“You could trust you could efficiently ship components and do different processes in different places,” she stated.

But issues had been mounting even earlier than the tariff nervousness. Naoko Uchiyama, professor at Tokyo College of International Research, stated Japanese auto corporations targeted for a few years on constructing compact automobiles for export to the US after they had been shedding market share to SUVs.

“They shifted to produce compact SUVs but their performance has not been as good as expected,” Uchiyama stated.

Ashimori Industry factory
Ashimori Business, a Japanese automotive components enterprise. arrange a manufacturing facility in northern Mexico in 2013 © Edgard Garrido/Reuters

Cautious Japanese buyers additionally need to grapple with safety dangers. Guanajuato has the best murder fee of any state in Mexico, at the moment struggling critical violence from disputes between organised crime teams.

But, for the second, many executives say they’re looking for to maximise their operations’ effectivity, to face up to any tariffs, quite than serious about relocating.

At Japan’s Minebea Mitsumi in Guanajuato, plant supervisor Luis González stated they had been paying shut consideration to information in regards to the potential 25 per cent tariffs however indicated they weren’t but chopping manufacturing.

The corporate was even considering bringing ahead some manufacturing, to make sure it may very well be exported earlier than imposition of any tariffs.

“You have to keep working; we can’t wait around,” he stated.

Really useful

Executives and analysts anticipate the uncertainty to pull on, partly due to a renegotiation of USMCA due in July subsequent 12 months.

Takao Nakahata, senior economist at Jetro. stated that, in a tariff world, Japanese auto corporations had been probably to put money into Southeast Asian international locations, together with Vietnam, quite than Mexico. They could additionally enhance US manufacturing, he predicted.

“Japanese investment in Mexico is going to be super slow until about July 2026,” Nakahata stated.

González stated the principle change thus far was a rise in uncertainty.

“Right now the intention is looking for how we can make improvements to reduce the impact of that 25 per cent,” he stated. “But it’s a big impact.”

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