Japan’s exports fall as US tariffs stoke recession risks

Japan’s exports fell for the first time in eight months as the US tariff campaign weighed on global trade, raising the risk of a technical recession after the economy contracted at the start of the year.Exports measured by value dropped 1.7% in May from a year earlier led by cars, steel and mineral fuel, the Ministry of Finance reported Wednesday. That compared with the median analyst estimate of a 3.7% decline. Imports declined 7.7%, led by crude oil and coal.
Japan’s trade balance stayed in the red for a second month, widening to a deficit of ¥637.6 billion ($4.4 billion).
The drop in exports and the widening trade deficit add to concerns that Japan’s economy could shrink again in the second quarter, ushering in a technical recession. Domestic consumption has remained weak as inflation continues to outpace wage hikes.US President Donald Trump has imposed a 25% tariff on imports of cars and auto parts, along with a baseline tax of 10% on all other Japanese goods. He also doubled a levy on steel and aluminum to 50% in early June.

The levies will stay in place for now as Trump and Japanese Prime Minister Shigeru Ishiba failed to reach a deal on the sidelines of the Group of Seven leaders’ summit after two months of bilateral negotiations. The 10% across-the-board tariff is set to revert back to 24% on July 9, in line with announcements made in April.

Car exports to the US declined 24.7% in May. Overall exports to the US fell 11.1% while imports slumped 13.5%, leaving Japan with a trade surplus of ¥451.7 billion. The gap, which narrowed for the first time in five months, has made Japan a target in Trump’s attempts to rebalance US trade with his tariff measures.

Meanwhile, Japan’s exports to China fell 8.8% and those to Europe increased 4.9%.

Also Read: Trump, Ishiba fail to reach trade deal at G-7 summit