Trump's tariffs are already spurring Japanese companies to shift more production to the U.S.

When it comes to Japan, it looks like President Donald Trump’s plan to use tariffs as a way to boost domestic production is working so far.

Japan’s export volume to the U.S. has fallen to the weakest level since 2021 while its overall exports remain above the 2024 average, Marcel Thieliant, head of Asia-Pacific at Capital Economics, said in a note on Thursday, citing recent data from the Bank of Japan.

“What is becoming increasingly clear though is that firms are responding to U.S. tariffs by stepping up production in their U.S. subsidiaries,” he explained.

In the second quarter, overseas subsidiaries of Japanese manufacturers in North America booked sales growth that was 6 percentage points faster than Japan’s overall exports to the region.

And in July, production in Toyota’s U.S. fac