**Washington**: President Trump’s announcement of new tariffs on imports has sparked concerns over inflation and a potential recession, notably affecting Japan’s export-driven economy. Analysts warn that the impacts could ripple through international markets, with predictions of significant economic strain in both nations.
The United States is set to impose a series of substantial tariffs on imports, which has elicited widespread concerns about the potential impact on both domestic and international economies. Announced by President Donald Trump, the tariffs include a minimum 10 percent levy on all exports to the United States, with additional tariffs specifically targeting Japan and other countries perceived as practising unfair trading methods. The implementation of these tariffs is scheduled to commence next week, igniting a flurry of activity among U.S. allies and economic analysts alike.
Economists in the United States have voiced apprehensions that Trump’s tariffs could further fuel inflation, complicating the Federal Reserve’s efforts to stabilise prices. Alan Detmeister, a former Federal Reserve economist now at UBS, predicted that the Fed’s preferred inflation measure, which excludes volatile food and energy prices, could rise to approximately 4.5 percent by the end of this year before peaking near 5 percent in early 2026, with a lingering rate of around 3 percent projected for 2027. Current statistics indicate that inflation stood at 2.8 percent as of February.
In addition to the anticipated economic strain, analysts have cautioned that a protracted trade war could lead to a global recession. Mark Zandi, chief economist at Moody’s Analytics, suggested that if the full force of Trump’s tariffs is realised and other nations retaliate, the U.S. could face a recession imminently, lasting well into the following year. He projected that growth could decline by as much as 2 percent, with unemployment potentially reaching 7.5 percent under such circumstances.
In Japan, the looming U.S. tariffs have raised alarms about the possible effects on the country’s economy, which relies heavily on exports. Analysts have forecasted that Japan’s annual economic growth could be slowed by up to 2 percent due to the tariffs. Takahide Kiuchi, an executive economist at the Nomura Research Institute, estimated a direct impact of over 0.7 percent reduction in Japan’s gross domestic product (GDP) within a year. The Daiwa Institute of Research further refined this prediction, estimating a decrease of approximately 1.8 percent in Japan’s inflation-adjusted GDP by 2029, coinciding with the end of Trump’s current term in office.
Japan’s automotive industry, a pivotal sector of its economy, stands to be particularly affected by the tariffs. With the U.S. being the largest market for Japanese car manufacturers, including Toyota and Honda, analysts have stressed that a decline in vehicle exports could reverberate through Japan’s economic landscape. In 2024, Japan shipped over 1.3 million vehicles to the United States, representing 28.3 percent of its total exports.
Despite recent wage increases across Japanese firms, which saw an average rise of 5.42 percent in yearly negotiations, the uncertainties surrounding U.S. tariffs complicate the goal of sustainable wage growth. The country had hoped to witness a rippling effect of wage increases that would extend to small and medium-sized enterprises, which employ a significant portion of the workforce. However, with rising global material costs and a weakening yen, many businesses find it challenging to accommodate further wage hikes, exacerbating fears of a potential recession.
Economic indicators suggest that confidence among major Japanese manufacturers is diminishing, with a recent survey by the Bank of Japan reporting a downturn for the first time in a year, attributed to the unclear trajectory of both the global and domestic economies under the weight of the new tariffs.
As developments unfold, the ramifications of the U.S. tariffs continue to be a looming concern for economies globally, particularly for countries like Japan, where export performance plays a critical role in overall economic health. The New York Times and Kyodo News are among those reporting on the evolving situation, capturing both market reactions and the increasing complexities of international trade relations in the face of escalating tariff measures.
Source: Noah Wire Services
Subscribe to Industry Updates
