REUTERS




 

Japanese electronics giant Sony and drinks maker Suntory are stockpiling inventory in the United States while their peers shift production or supply chains in efforts to fend off an evolving threat of U.S. tariffs on the export-reliant economy.

In his latest trade salvo this week, President Donald Trump hinted that he might target Tokyo next, after throwing up new tariff barriers against Mexico and China, low-cost production hubs favoured by key Japanese industries, such as automakers.

The scale of the tariff threat for Japan Inc has been further highlighted by Honda's decision to produce a new model of one of its top-selling cars in the United States, instead of Mexico, Reuters exclusively reported on Monday.

Japan Display, a major supplier of LCD screens to the auto industry, said it was also considering production of some items in the United States, partly to avoid tariffs, a move a recent survey showed is being considered by hundreds of peers.

Major Japanese suppliers to iPhone maker Apple - Alps Alpine  and Murata Manufacturing are among other firms looking to insulate supply chains from escalating trade tension.

"Corporates are now more aware that Japan could also be a target," said Norihiro Yamaguchi, a senior economist at Oxford Economics.

Yamaguchi pointed to Trump's warning that the United States may use tariffs to offset any competitive disadvantage to its manufacturers if Japan and China do not stop reducing the value of their currencies.

The protectionist U.S. president is set to levy reciprocal tariffs globally and industry-specific duties that could further hurt Japan, the world's fourth largest economy, a top exporter to the United States and its biggest source of foreign investment.

Japan has denied devaluing its currency and pledged U.S. investments to assuage Trump's concerns on trade. Its trade minister is set to visit Washington as soon as next week to seek tariff exemptions, domestic media have said.

Japanese companies are particularly exposed to trade duties as many have concentrated for decades on overseas sales, particularly to the United States, to counter weak domestic demand and a shrinking population, Yamaguchi said.

Almost nine in 10 Japanese companies expect Trump's policies to hurt business, a Reuters survey showed last month.

Of these, 72% saw his trade strategy, including more tariffs, as the most detrimental factor, while 26% chose friction between the United States and China, Japan's other major trading partner.

Even before accounting for tariffs that may target Tokyo, think tank the Daiwa Institute of Research projects that a trade war between the United States and other countries including China could shave 1.4% from Japan's $4.2-trillion economy over two to three years.

Stefan Angrick, a senior economist with Moody's Analytics, said it was challenging to quantify the economic damage from tariffs as the business uncertainty they created could be more devastating than any direct impact.