When car maker Mazda sneezes, everyone catches a cold, say people in its hometown of Hiroshima in western Japan, but these days, auto parts maker Yuji Yamaguchi fears a deep chill is on the way.
"If Mazda builds fewer cars, our orders will drop," said Yamaguchi, whose 110-year-old firm, Nanjo Auto Interior, has almost 1,000 employees making door panels and other parts for the automaker, which accounts for more than 90% of its sales.
"The key thing is whether we can remain profitable with lower volumes."
The economic engine of Hiroshima, a manufacturing hub 800 km (500 miles) southwest of Tokyo, Mazda faces U.S. tariffs of 25% on automobiles, a dispiriting prospect for an electorate already battling inflation and a weak economy.
Japan votes on Sunday in an upper house election that looks set to weaken the grip on power of Prime Minister Shigeru Ishiba, who has failed to win a tariff reprieve from the United States, its closest ally and a crucial trade partner.
"I have no expectations for the Japanese government anymore," said Yamaguchi, a great-grandson of Mazda founder Jujiro Matsuda. "I'm past frustration and have just resigned myself to things."
As people in Hiroshima and other auto manufacturing regions, brace for the inevitable fall-out from tariffs, Yamaguchi said he had little hope the government could turn the tide.
President Donald Trump has given no sign of relenting on his tariffs, and has even hinted at raising those against Japan.
Mazda, which saw U.S. sales fall 18.6% in May on the year and by 6.5% in June, is one of the Japanese car makers most exposed to U.S. tariffs.
Imports bring in the bulk of Mazda's American sales, but the importance of the wider industry for Japan is almost impossible to overstate.
After Japan ceded global leadership in chips and consumer electronics, its auto industry has grown to make up about 28% of the roughly $145 billion worth of goods shipped to the United States last year.
There are more than 68,000 companies in Japan's auto supply chain, a July survey by research firm Teikoku Data Bank showed, and the JAMA industry group says they employ 5.6 million people, or about 8% of the labour force.
"A supply chain is hard to rebuild once broken," said Hideki Tsuchikawa, research head at Teikoku Databank’s branch in Hiroshima, which his firm estimates is home to more than 2,000
auto suppliers.
"Automobiles are a core national industry. Government support is essential."
The tariffs could cost Mazda and other smaller Japanese automakers U.S. market share lost to bigger rivals, said Julie Boote, an autos analyst at Pelham Smithers Associates in London.
Mazda, headquartered in Hiroshima, where it has assembly plants, has so far declined to give a full-year earnings outlook, citing the uncertainty of tariffs.
In a statement, Mazda told Reuters its top priority was to protect suppliers, dealers and employees as it looked to overcome the tariff impact.
It anticipated significant impact in the short term, the company said, adding it was taking all possible steps, such as asking for government countermeasures.
Source: Reuters