Japan has raised the issue of auto tariffs with the US after President Donald Trump threatened to impose a 25 percent levy on car imports, a move that would deliver a big blow to Japan’s economy.

Tokyo is closely watching any potential impact stemming from higher levies, which the president said might officially be unveiled as soon as April 2. Economists estimate the impact would be substantial given that cars make up the largest component of Japan’s exports, with the US as the No 1 market.

“We have been raising the issue with the US government, given the importance of Japan’s automobile industry,” Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said at a press conference on Wednesday. “Japan will first carefully examine the specific details of the measures that will come out and their impact on Japan, and then respond appropriately.”

Hayashi’s remarks come after Foreign Minister Takeshi Iwaya raised the issue with his counterpart Marco Rubio last week, when Tokyo also asked for exclusion from Trump’s reciprocal tariffs. The Asian nation is also seeking exclusion from his fresh tariffs on steel and aluminum.

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“Considering that around a third of exports to the US are cars, the impact on the Japanese economy will be significant,” said Harumi Taguchi, principal economist at S&P Global Market Intelligence. “If a 25 percent tariff is imposed on all countries, car prices in the US will rise, and if purchasing demand doesn’t keep up, that also means demand for Japanese exports will fall.”

It’s not clear if Japan is also seeking an exemption from the auto tariffs as Trade Minister Yoji Muto didn’t respond directly on Tuesday when asked about it. Japanese firms may also be hit by 25 percent tariffs on the chips and pharmaceutical sectors as well, though details are scarce.

Exports of chips and chip-making devices made up only 3.7 percent of Japan’s total shipments to the US in 2024. Medical items accounted for only 1.9 percent of the total. In a reflection of concerns over Japan’s key industries, sub-groups within the benchmark Topix index representing cars, pharmaceuticals and precision machinery were all underperforming the overall index Wednesday.

The impact from tariffs will be much bigger for Japan’s auto sector compared to other industries, as car and car parts made up a little over a third of Japan’s exports to the US last year. There’s a good chance that Japanese automobiles will be targeted given Japan is among the top car exporters to the US.

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That would be a hit to many workers in Japan, as auto-related companies including material providers employ 5.58 million people in the country, or 8.3 percent of the total workforce, according to the Japan Automobile Manufacturers Association.

Last year, auto exports accounted for 17 percent of all outbound shipments for Japan, with more than a third of them going to the US. That played a big role in keeping Japan’s trade surplus with the US at a high level, a fact that risks Trump’s ire as the president aims to use tariffs to lessen the US’s trade deficits and pressure other nations to build factories in the US.

Still, Japanese manufacturers already make more cars in the US than they export to the market from their home country, according to JAMA estimates. In 2023, Japanese carmakers made 3.3 million cars in the US, more than twice the 1.5 million cars they exported to the nation.