Japan’s Trade Deficit Hits $15B as Trump Tariffs Bite

Japan recorded a 2.2 trillion yen ($15 billion) trade deficit for the first half of 2025, driven by a sharp decline in exports due to U.S. President Donald Trump’s 25% tariffs on Japanese vehicles and other goods, according to government data released Thursday. The tariffs, temporarily paused until August 1, 2025, to allow for trade negotiations, have already disrupted Japan’s economy, with no deal yet in sight.

June saw Japan’s exports drop 0.5% year-on-year to 9.2 trillion yen ($62 billion), marking a second consecutive month of declines. Imports edged up 0.2% to 9 trillion yen ($61 billion), resulting in a modest trade surplus of 153 billion yen ($1 billion), a stark contrast to May’s 637.6 billion yen ($4.4 billion) deficit. Exports to the U.S. plummeted 11%, with auto shipments crashing 25%. Shipments to China and Mexico, a key hub for Japanese automakers, fell nearly 5% and 20%, respectively.

For the first half of 2025, Japan’s exports rose 3.6% to 53.4 trillion yen ($360 billion), while imports grew 1.3% to 55.6 trillion yen ($375 billion). The trade deficit shrank 34.2% from the previous year, but Trump’s tariffs threaten further economic strain. Japan, a key U.S. ally, has emphasized its significant investments in the U.S., employing hundreds of thousands, in ongoing trade talks. However, Trump’s focus on increasing U.S. rice imports—Japan already imports over 300,000 tons annually, partly for animal feed—remains a sticking point.

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With Japan’s Upper House election looming on Sunday, Prime Minister Shigeru Ishiba’s Liberal Democratic Party faces declining support, potentially jeoparding its majority. The economy, which contracted 0.7% annually in Q1 2025, continues to grapple with tariff-induced export slowdowns and a weakening yen.

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