Toyota is stuck in neutral after the latest U.S. and Japan tariff update

Last month, the U.S. auto industry got the news it had been waiting for.

The White House triumphantly announced new tariff deals with Japan and the European Union. Japan and Mexico import the most vehicles into the U.S., and Germany isn’t far behind. 

The U.S. said it would lower auto tariffs on Japan to 15% from 27.5%. 

Related: Latest tariff deals leave US automakers in a tough position

Japan has been clear that the auto sector is its top priority in negotiations.

“There’s no point striking a deal with the U.S. without an agreement on automobile tariffs,” Ryosei Akazawa, Japan’s lead trade negotiator, said last month. 

According to one estimate, Japan exported $40.76 billion worth of cars to the U.S. in 2024, representing nearly 19% of all auto imports. 

But while the announcement two weeks ago was a sigh of relief for Japan, this week seems like the deal could fall apart at any minute. 

U.S. and Japan are not on the same page on tariffs

Akazawa met with his U.S. counterpart, Commerce Secretary Howard Lutnik, in Washington, D.C., on Wednesday, urging him to implement the agreed-upon tariff reductions for Japanese car and auto parts, the Japanese government said, according to Nikkei Asia. 

But apparently, the White House has been dragging its feet on actually fulfilling its end of the deal, even though the two sides had reached an agreement. 

Related: Toyota and Honda play a giant role in US-Japan trade negotiations

“There are all sorts of debates over the tariffs, but we have reached an agreement,” Japanese Prime Minister Shigeru Ishiba said from Japan on Wednesday, according to Bloomberg. 

“As stated by US government officials involved in previous US-Japan trade negotiations, it is much, much more difficult to implement the deal than agree on it.”

Toyota, Honda, and Nissan have much at stake in tariff negotiations

Japan sells a lot of vehicles in the U.S. 

While General Motors still has the highest market share at 17% and Ford ranks third with a 13% market share, foreign models from Asia round out the top five, according to Cox Automotive data.

Toyota  (TM)  ranks second with 15% U.S. market share, while Korean brand Hyundai ranks fourth with 11%. Toyota’s fellow Japanese brand, Honda, is fifth in the market, with 9%.

Toyota sold over 2.3 million vehicles in the U.S. in 2024, a 3.7% year-over-year increase.

But Japanese brands don’t just ship cars to America; they also build them here. 

Last year, Japanese auto manufacturers produced 3.28 million vehicles in the U.S.

Japan has invested heavily in U.S. auto manufacturing

Japanese autos are extremely important to Japan’s economy, and President Donald Trump has used this fact in negotiations. 

“They won’t take our cars, and yet we take millions and millions of their cars into the United States. It’s not fair, and I explained that to Japan, and they understand it,” Trump said in an interview on Fox News’ “Sunday Morning Futures with Maria Bartiromo.”

Honda, Subaru, Nissan, Mazda, and Toyota combined employed nearly 75,000 manufacturing employees in the U.S. last year.

Japan Automobile Manufacturers Association (JAMA) says its members have spent $4.6 billion on research and development.

Related: President’s latest interview gives US automakers much-needed boost