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WASHINGTON, DC - JULY 7: An adjutant picks up a leafage from a missive to Japan and South Korea, signed by U.S. President Donald Trump, announcing 25% tariffs opening connected August 1st, during the regular property briefing successful the Brady Press Briefing Room astatine the White House connected July 7, 2025 successful Washington, DC.
Andrew Harnik | Getty Images News | Getty Images
In the archetypal batch of "tariff letters" sent to trading partners, U.S. President Donald Trump took purpose astatine 2 of the closest U.S. allies successful Asia: Japan and South Korea — some are already bearing the brunt of the existing duties connected car and alloy exports.
Additional tariffs would further wounded these 2 exports-dependent economies that are grappling with a slowdown successful growth, with Japan apt staring astatine a method recession, oregon 2 consecutive quarters of economical contraction.
Both Japan and South Korea saw first-quarter gross home merchandise declaration connected a quarter-on-quarter basis.
While South Korean imports to the U.S. look 25% tariffs, the aforesaid arsenic Trump promised successful April, the complaint connected Japan has been raised by 1 percent constituent to 25%.
Exports — including services — made up astir 22% of Japan's GDP successful 2023, according to the latest information from the World Bank, and 44% of South Korea's GDP successful 2023.
Currently, imports of automobiles and car parts to the U.S. incur a 25% tariff, portion alloy and aluminum pull a 50% levy connected astir countries.
Automobiles are Japan's largest exports to the U.S. and are besides among South Korea's apical exports. South Korea was also the fourth-largest exporter of alloy to the U.S. in 2024, according to the International Trade Administration nether the U.S. Commerce Department.
Japan's Prime Minister Shigeru Ishiba reportedly said the state "actively seeks the accidental of an statement that benefits some countries, portion protecting Japan's nationalist interest." In May, Ishiba said that his state volition not judge a woody that does not spot the removal of car tariffs.
The recently announced tariffs volition little Japan's GDP by 0.1 percent constituent by end-2026, according to Norihiro Yamaguchi, Lead Japan Economist astatine Oxford Economics.
"Given that the system is already suffering from precocious tariffs connected car and elevated planetary commercialized argumentation uncertainly, and besides anemic consumption, the interaction shouldn't beryllium dismissed," helium told CNBC
Yamaguchi said that Japan's system volition "barely grow" successful the 2nd fractional of 2025 and successful the archetypal fractional of 2026, if not falling into a recession.
"The betterment successful home request has been delayed, portion export maturation is expected to dilatory further owed to the interaction of U.S. tariffs," the BOK said.
Frederic Neumann, Chief Asia Economist astatine HSBC told CNBC that should Japan and South Korea neglect to scope a deal, these tariffs volition airs "considerable headwinds to growth."
Both Japan and South Korea are already facing sluggish home demand.
Offering a metallic lining, Trump said that helium was consenting to "perhaps, see an accommodation to this letter" if the countries were to unfastened their "heretofore closed" markets to the U.S.
Pressure tactics are being brought to carnivore connected South Korea and Japan, said Vishnu Varathan, managing manager astatine Mizuho Securities.
"The vexation with Japan's much principled and holistic attack (covering sectoral tariffs) stalling a woody being a root of vexation for U.S. commercialized negotiators, and crucially for Trump, speaks for itself." helium added.
While Trump has not publically expressed choler toward South Korea, Varathan said "it is not unimaginable that determination are sticking points akin to Japan's, thereby invoking the letter."
Markets, meanwhile, look to beryllium shrugging of the tariff threats — for now. HSBC's Neumann said that Trump's letters essentially amounts to a deadline hold for tariff negotiations by 3 weeks.
"Financial markets are taking the latest quality successful their stride, focusing connected the anticipation that the threatened tariffs whitethorn inactive beryllium whittled down done negotiation," helium said.
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