April 7, 2025
TOKYO/ SEOUL – They are not household names, but the nuts and bolts they manufacture are used in vehicles bearing the logos of Japan’s Toyota, South Korea’s Hyundai and America’s General Motors (GM).
These businesses, many of which are small and medium-sized enterprises (SMEs) in the industrial heartland of Japan and South Korea, are invisible to car buyers but crucial in firing up the engines of the auto industries.
However, without the wherewithal of their big-name clients to weather the storm, they are expected to be hard-hit by American tariffs. Levies of 25 per cent on cars kicked in on April 3, with similar duties on car parts to follow by May 3.
Most major carmakers like Toyota, Honda and Hyundai have said they will leave sticker prices of their US-sold vehicles unchanged for now, even as some smaller players like Subaru have warned that they “cannot guarantee” current pricing.
Still, global car industry supply chains are highly integrated, complex and reliant on companies like Benda Kogyo, which was founded in 1964 in Kure in Japan’s Hiroshima prefecture. It has 142 employees in Japan and another 1,026 staff at its subsidiaries, including in China and South Korea.
It is the world leader in the manufacture of metal rings used in car components such as gears and pistons, with customers including Honda, Nissan, Hyundai and GM.
Its president Kazunari Yashiro told The Straits Times that direct exports to the US accounted for 11.7 per cent of the company’s overall consolidated sales in 2024.
It also sells to GM’s factory in South Korea, from where 419,000 vehicles were shipped to the US in 2024, accounting for 84.8 per cent of total production.
Mr Yashiro feared two potential medium- to long-term scenarios as US importers are saddled with the tariffs. For one, they may pass on costs to car buyers, which may dampen sales and, in turn, reduce demand for components from suppliers like his company.
“Or they could ask suppliers to shoulder the burden by negotiating down contracts, which will lead to lower profitability,” he said, noting that the company is looking at growing its sales channels in regions outside the US, such as South-east Asia, India and Europe.
Over in Higashiosaka in Osaka prefecture, Fusehatsu Kogyo manufactures springs – almost unseen yet essential items – that wind their way into vehicles, as well as everyday products like furniture and electronics.
“We are very worried because we have no clarity at all of how the tariffs will impact our business,” its president Atsushi Yoshimura told ST, lamenting how he is already struggling to raise wages for his 42 employees.
“It has honestly been difficult to price in labour costs, even for contracts with large clients that have huge profits,” he said.
“The tariffs will pose another significant strain.”
In Japan, some 5.6 million people work in jobs related to the auto industry, which accounts for 8 per cent of all jobs.
Nomura Research Institute executive economist Takahide Kiuchi said that the tariffs would be a massive blow to an economy that is finally seeing bright sparks after decades of stagnation.
In South Korea, car industry representatives have asked the government to come up with measures to support manufacturers of car parts which are expected to be severely hit by US tariffs.
These companies, which mostly work with Hyundai and Kia, exported US$8.22 billion (S$11 billion) worth of components in 2024, reported Yonhap News Agency, citing data from the Korea Auto Industries Cooperative Association. The components included those used in a car’s suspension system and bumpers.
Both Japan and South Korea are US security allies and export-oriented economies with bilateral trade deals with America.
Yet, US President Donald Trump cast them as the “worst offenders” on April 2, as he slapped country-specific duties of 25 per cent on imports from South Korea and 24 per cent on Japan.
These are separate from blanket global industry-specific tariffs already slapped on cars.
Japan’s Prime Minister Shigeru Ishiba, having tried but failed to secure tariff exemptions at a February summit with Mr Trump, said on April 4 that his country was facing a “national crisis” that requires an “unprecedented” response.
Tokyo’s relief measures thus far are focused on helping SME suppliers to the auto industry.
They include subsidy schemes, relaxed requirements for loans, and pledges to cover any losses incurred through contract cancellations owing to the tariff measures.
Mr Yoshimura, however, told ST: “If Trump’s tariffs are to persist, bold support beyond superficial cash flow measures is needed, such as reducing the corporate tax or social insurance burden, or the increase in minimum wages.”
In Seoul, Industry Minister Ahn Duk-geun described the tariffs as “regrettable” as he pledged to swiftly devise support measures to reduce the fallout, and negotiate directly with counterparts in Washington.
A report by BMI Country Risk and Industry Research consultancy on April 3 has forecast a direct economic hit of 0.7 per cent to Japan’s gross domestic product, and 1.6 per cent to that of South Korea.
Ms Asuka Tatebayashi, a senior analyst at Mizuho Bank’s global strategic advisory department, told ST that the tariffs will force companies to assess “how much cost they can absorb (and) how long they can tolerate this”.
Companies will also start asking internally how to hedge against risk, including by reconfiguring supply chains, she said, although reconstructing logistical networks “will not happen overnight – or even within a couple of weeks or months – and will need longer-term planning”.
The tariffs came despite heavy investments by Japanese and South Korean carmakers in vehicle production in the US itself – even as cars remained the top export item to the US for both countries in 2024.
Japanese carmakers manufactured 3.3 million cars across its 24 plants in the US in 2024, said Japan Automobile Manufacturers Association chairman Masanori Katayama. Together with 43 R&D and design facilities and 70 distribution centres across 27 states, these operations created over 110,000 jobs in the US and another 2.2 million indirectly, he said.
Still, Japan exported 1.37 million vehicles to the US in 2024, worth 6.3 trillion yen (S$57.8 billion) or 28.3 per cent of the total value of US exports. It also shipped another 1.2 trillion yen in car parts to the US.
Meanwhile, vehicle shipments from South Korea to the US in 2024 were valued at US$34.7 billion, making up nearly half of the country’s overall global export value.
Yet, South Korean companies are also investing heavily in the US.
Hyundai Motor Group – the largest carmaker in South Korea – announced on March 24 a US$21 billion investment in the US through 2028. The company also launched its third US production base in Georgia on March 26.
These efforts, however, failed to win South Korea any reprieve from tariffs. Hyundai Motor Group’s executive chairman Chung Eui-sun said the onus was still on Seoul to negotiate more favourable duties with Washington.
“I know our investment plan can hardly affect Washington’s tariff policies,” he said at the launch of the Georgia base, on the same day Mr Trump announced his car sector tariffs. “We are just a company. This is a country-to-country issue.”
Former South Korean trade minister Yeo Han-koo told ST that the tariffs were “unfair”, particularly in the light of substantial South Korean investments in key US sectors, including battery electric vehicles, semiconductors and solar panels.
“This trade surplus that South Korea has recorded with the US actually stems from this increase in investment by South Korean companies, and related exports to support such investments,” said Mr Yeo, who is now a senior fellow at the Peterson Institute for International Economics think-tank.
The veteran trade negotiator said that it would be more constructive for South Korea and Japan to work together to “find a reasonable and more amicable solution than confrontation (with the US)”.
“The Trump administration is really determined to put up a high tariff wall, just to be Fortress America,” he said. “We have to face the reality that this is a new normal, but, beyond the short term, there are opportunities to collaborate in strategic sectors like energy and shipbuilding”.
- Walter Sim is Japan correspondent at The Straits Times. Based in Tokyo, he writes about political, economic and sociocultural issues.
- Wendy Teo is The Straits Times’ South Korea correspondent based in Seoul. She covers issues concerning the two Koreas.