Japan Biz Alarmed at Prospect of Long U.S.-China Trade War

May 11, 2019

Tokyo--Japanese businesses are alarmed at the prospect that the U.S.-China trade war will drag on further, after Washington implemented a massive tariff hike Friday.

Many Japanese manufacturers are taking steps to shift production from China to reduce the impact of higher U.S. tariffs on Chinese products.

But it is difficult to assess how the conflict will affect the global economy. Bleak outlooks may cause companies to reduce fixed investment and dampen consumer sentiment.

"It is very uncertain how long the 25 pct tariffs will continue," said Panasonic Corp. <6752> Managing Executive Officer Hirokazu Umeda.

The United States last year introduced punitive tariffs on 250 billion dollars' worth of Chinese products. The tariff rate stood at 25 pct for 50 billion dollars' worth and 10 pct for the remainder.

On Friday, Washington raised the rate for the 200-billion-dollar portion to 25 pct.

The hike affected some 5,700 items, such as furniture, foodstuff, electronics parts including computer storage devices, and home appliances including refrigerators and air conditioners. Rises in their prices would affect consumer sentiment.

Financial market analysts, however, do not expect huge direct effects. "The direct impact of the tariff hike on Japanese companies will be limited," said an official of a major securities company.

This view reflects progress in efforts by Japanese manufacturers to move production activities out of China from last year.

"We've changed our supply chain for product parts this year," said an official of Sumitomo Heavy Industries Ltd. <6302>.

"Among our products, digital camera accessories are affected (by the tariff hike)," an official of Fujifilm Holdings Corp. <4901> said. "But the impact will be limited because their export value is just hundreds of millions of yen."

Panasonic sounded jittery, saying it cannot tell how long the spat will continue.

"We've roughly factored in the impact on our own products," Umeda said. "But we don't know how our clients will be affected."

U.S. President Donald Trump has indicated the possibility of expanding the punitive tariffs to all other U.S. imports from China.

If the 25 pct rate expands to cover all U.S. imports from China, the Asian country's gross domestic product will be pushed down by up to 1.5 pct and the United States' GDP by 0.6 pct, according to estimates by the International Monetary Fund.

"We don't know what will happen next," Mitsubishi Motors Corp. <7211> Chief Executive Officer Osamu Masuko said. "This uncertainty has made us very uncomfortable in devising our business plan for China." Jiji Press