On April 2, 2025, the U.S. government announced a sweeping overhaul of its tariff system. This marks a departure from the traditional low-tariff framework, which averaged 2.5 percent, toward a "baseline tariff system" that will apply a standard 10 percent tariff on goods from all countries. In some cases, significantly higher tariffs will be imposed. The full implementation is set for August 1, 2025, and the announcement has sent shockwaves through global exporters.

This article focuses on how Japanese manufacturers, particularly those in back-office roles, can respond both practically in the short term and strategically in the medium to long term. It reflects the latest information available at the time of writing.
 

1. Background: A Sharp Turn Toward U.S. Protectionism

In 2024, the U.S. trade deficit increased sharply, growing from 784.9 billion dollars in 2023 to 918.4 billion dollars. Exports rose by 119.8 billion dollars, but imports surged by 253.3 billion dollars. In response, the U.S. began shifting to more protectionist policies in early 2025.

This change challenges the growth model of Asian exporters, including Japan, China, and India, who have long relied on the U.S. market. Japanese companies now face several risks:
 

• Declining profitability
• Loss of price competitiveness
• Strained relationships with U.S. business partners

If this policy direction continues, Japanese manufacturers could experience significant structural impacts.
 

2. Immediate Countermeasures: Re-examining Contracts, Logistics, and Internal Systems

In the short term, Japanese companies are taking swift action to manage risks and maintain operations. Key responses include:
 

(1) Reviewing Contracts and Pricing

• Reconfirming terms in U.S.-bound export contracts
• Shifting from FOB (Free on Board) to CIF (Cost, Insurance, and Freight) terms
• Renegotiating pricing conditions, including exchange rate risks.

(2) Restructuring Supply Chains and Logistics Routes

• Considering transshipment through third countries
• Adjusting transport routes and changing ports to optimize customs processes
• Using bonded warehouses to defer tariff payments

(3) Developing and Strengthening Internal Operational Systems

• Reviewing Harmonized System (HS) codes to ensure accurate classification
• Improving documentation processes for U.S. exports
• Enhancing coordination across departments including trade, accounting, legal, and tax

In parallel, companies are being forced to reassess ongoing North American projects and considering whether to continue, suspend, or exit them based on the new conditions while some have begun reviewing the plans themselves.
 

3. Going on the Offensive: Accelerating U.S. Localization with Bold Investment

Beyond short-term adjustments, some companies are moving aggressively to localize operations in the U.S. and gain long-term advantages.
 

Common Strategies Include:

• Establishing a local production and local sales model by building new factories and expanding production lines in the U.S.
• Acquiring U.S. businesses, especially mid-sized firms with succession challenges
• Setting up new subsidiaries to handle direct imports and local distribution

These moves are no longer limited to large enterprises. Increasingly, mid-sized and small businesses (SMEs) are pursuing U.S. localization not only to avoid tariffs but to secure a sustainable position in the market.
 

4. Rethinking Global Structure: Redefining Regional Structures

The tariff issue is not limited to the U.S.; it's intertwined with complex factors like geopolitical risks, currency fluctuations, and soaring raw material prices. Therefore, future overseas strategies require the following redesign:
 

• Regional diversification of supply chains (from "China+1" to "Asia+Africa").
• Restructuring optimal location strategies based on each country's tax and tariff systems.
• Redesigning global governance systems, including R&D and marketing functions.

In parallel, there's a need to shift from mere cost reduction to a value-provision business model that leverages brand power and quality. Strengthening the ability to pass through price increases by building differentiated products, and pursuing high-value-added models are becoming essential.
 

5. Expanding into Emerging Markets: Opportunities in the Global South

Some Japanese companies are exploring expansion into emerging markets, not only to mitigate tariff risks but also with an eye toward reducing their reliance on the U.S. The following regions are attracting attention:
 

• ASEAN (Southeast Asia): Balancing a stable consumer market with manufacturing bases.
• Middle East and Africa: Potential for growth driven by infrastructure demand and population increase.
• Latin America: Leveraging Free Trade Agreement (FTA) networks and regional partnerships for competitive advantage.

While these regions require long-term market development, a holistic strategy that includes exchange rate risk and securing labor could make them a second growth engine for Japanese companies.
 

6. Conclusion: Viewing the Tariff Crisis as a "Chance for Transformation"

While the new U.S. tariff regime presents a serious external shock, it may also serve as a catalyst for long-overdue structural reform. History shows that many Japanese companies have used past trade tensions to build resilience and sharpen competitiveness.

This moment calls for more than defensive action. It demands strategic rethinking, proactive investment, and bold structural reform. By embracing transformation, Japanese manufacturers can turn today’s challenges into tomorrow’s competitive edge.

We hope this article offers practical and strategic guidance for those navigating the complex realities of global trade in 2025.

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