Japan’s exports fall as US tariffs stoke recession risks

Japan’s exports fell for a second month as the US tariff campaign continued to weigh on trade, further raising the risk of a technical recession after the economy contracted at the start of the year.Exports measured by value dropped 0.5% in June from a year earlier, led by cars and steel, the Ministry of Finance reported Thursday. That missed the median analyst estimate of a 0.5% increase, and appeared to reflect the impact from the Trump administration’s tariffs.

Imports eked out a gain of 0.2%. Japan’s trade balance returned to a surplus for the first time in three months, at ¥153.1 billion ($1 billion).
The drop in exports add to concerns that Japan’s economy could shrink again in the second quarter, ushering in a technical recession. Domestic consumption surged in May, but its sustainability remains unclear as inflation continues to outpace wage hikes.Exports to the US sank 11.4% while those to China declined 4.7% and shipments to Europe rose 3.6%. The yen averaged 144.04 against the US dollar in June, 8% stronger than a year earlier, according to the Finance Ministry. A stronger yen tends to cut the value of dollar-denominated trade figures when converted into the Japanese currency.

Global commerce is facing high uncertainties amid the tariff war in which the Trump administration’s threats and implementation of higher tariffs have so far resulted in few bilateral deals. Negotiations between the US and many nations including Japan are dragging out as countries find it difficult to come to an agreement.

Tokyo has been hit by a 25% tariff on cars and car parts and a 50% levy on steel. Separately, in June it was also facing a 10% baseline tariff on all other shipments to the US. The across-the-board levy is set to rise to 25% on Aug. 1 barring a deal, slightly higher than the 24% originally set in April.