Japanese auto stocks fall after Trump unveils Mexico tariffs

Shares in Japanese carmakers fell on Friday after the Trump administration said it would slap tariffs on all Mexican exports, in a fresh sign that global trade tensions are accelerating. 

In morning trading in Tokyo, Nissan slipped as much as 4.6 per cent, Toyota 2.7 per cent and Mazda 9 per cent. The benchmark Topix index was down 0.8 per cent and heading for its lowest closing level since January.

Those declines came after US President Donald Trump said late on Thursday that US customs officials will begin imposing duties of 5 per cent on Mexican imports from June 10. The duties, intended to strong-arm the Mexican government into stemming the flow of migrants across the US border, will rise in stages to 25 per cent by October.

Mexico is a significant production centre for Japanese car makers, which they use as an export base to sell cars into the United States, according to data from the Mexican Automotive Industry Association.  

Mio Kato, founder of investment research firm Lightstream Research, said earnings at Mazda and Nissan were the most sensitive to the tariffs out of Japan’s major carmakers. Nissan “has very significant operations in Mexico and it is also a big market for them, in addition to being an export base. So if the domestic economy is hurt, that will hurt Nissan,” he said.

Shares in some South Korean automakers were also rocked by Mr Trump’s tariff threat. Kia Motors fell as much as 6 per cent and Hyundai as much as 3 per cent. 

Mr Trump’s announcement of tariffs on Mexican-made goods prompted ructions else in financial markets as investors processed the repercussions for global trade. The Japanese yen and gold, both haven assets, edged up by 0.2 per cent, while the Mexican peso slumped by as much as 2.4 per cent. 

The Trump administration has also dangled the threat of tariffs on vehicles exported from Japan itself, but earlier in May delayed a decision on imposing such duties by six months.