Japan’s trade drops as US tariffs raise economic concerns

Japan’s economy is facing challenges as its exports fell for the first time in eight months in May 2025, largely due to new US tariffs. The value of exports dropped by 1.7% compared to last year, with cars, steel, and mineral fuels hit hardest, according to the Ministry of Finance. This decline signals potential trouble for Japan, which is already at risk of a recession after its economy shrank earlier this year.

The US, a key market for Japanese goods, saw an 11.1% drop in shipments, driven by a 25% tariff on cars and other products. Meanwhile, exports to China fell by 8.8%, but those to Europe rose by 4.9%. Despite the lower export value, the volume of goods shipped increased by 1.8%, suggesting Japanese companies may be cutting prices to cope with the tariffs. This could hurt their profits and weaken the economy further.

The trade deficit widened, adding to worries that Japan’s economy might shrink again in the second quarter. Business confidence is also declining, with big firms expecting a 1.2% profit drop this fiscal year, especially in the auto industry. These tariffs, part of a broader US trade policy under President Trump, are creating uncertainty and threatening Japan’s fragile recovery. Policymakers now face a tough task to stabilize growth.