The Bank of America (BofA) has warned that new U.S. tariffs on Japanese goods could have a serious impact on Japan’s economy.
Starting August 1, 2025, the U.S. will impose a 25% tariff on all goods imported from Japan and South Korea. President Donald Trump says this move is in response to what he calls “unfair trade practices” and the large trade deficits the U.S. has with both countries.
According to BofA, if these tariffs are implemented as planned, the average duty on Japanese exports to the U.S. would rise from just over 15% to 25%. Japan’s exports to the U.S. accounted for 3.5% of its GDP in 2024, so the direct impact could lower GDP by 0.4–0.5 percentage points, up from an earlier estimate of 0.3 points.
BofA also noted that secondary effects on supply chains and the overall uncertainty could worsen the situation.
This could put political pressure on Prime Minister Shigeru Ishiba and Japan’s ruling Liberal Democratic Party (LDP), especially as they played a key role in trade talks with the U.S. which lasted for three months but failed to prevent the tariffs.
With the economy facing increased risks, support for new stimulus measures may grow within Japan. BoA expects the Bank of Japan (BoJ) to hold off on interest rate hikes through 2025, waiting to assess the impact of these tariffs. The next rate hike is likely in January 2026, though it could be delayed to March or April if economic conditions worsen.
Prime Minister Ishiba has said he won’t “easily compromise” in the ongoing trade discussions, calling the situation difficult. President Trump has also hinted at raising tariffs even further — to 30–35% — and said he plans to demand payment from Japan through a formal letter.
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