The White House last week started a 30-day clock toward announcing specific penalties to punish Japan for failing to open its markets to U.S. exports. The effect on the Japanese yen was immediate. Already nearing historic highs, the yen strengthened further last week, putting additional upward pressure on U.S. prices for Japanese goods.
And should the U.S. impose new tariffs on imported cars, trucks and parts used in the Japanese-owned assembly plants in the U.S., the cost difference between Japanese automobiles and domestics could exceed the current $2,000 level.
"It's a little early for us to have discussions about it," said a spokesman for Mitsubishi Motor Sales of America. "Thirty days from now, when we have a list of the possible trade targets, the implications will make themselves apparent."
But with the high ticket of automobile sticker prices, even slight changes in the relative value of the yen to the U.S. dollar translate to huge drops in profit for the Japanese car marketers. A 1 yen change in the exchange rate translates to $51 million annual profit or loss for market leader Toyota Motor Co.'s U.S. operations.
Leading Japanese car marketers have been addressing the exchange rate problems primarily by moving assembly and parts procurement to the U.S. In addition, Toyota, Nissan, Honda, Mazda and Mitsubishi have all incorporated "Made in the USA" themes into their ad campaigns.
Domestic car companies have remained surprisingly silent on the trade imbalance issue; however, several executives at Japanese automobile marketers note that the Big 3 are enjoying record profits and unlikely to push the issue.
Meanwhile, the trend toward transplanting production to the U.S. is likely to continue for the Japanese.
"It's been a longtime situation for the Japanese to move more production here or add domestic content," the Mitsubishi spokesman said. "This just adds fuel to the fire."