Preparing for headwinds or maintaining a wait-and-see attitude: A survey of 15,000 manufacturers
What is the impact of the Trump administration’s reciprocal tariffs and tariff hikes on Japanese firms? How do Japanese firms respond? We fielded a survey with the Research Institute of Economy, Trade and Industry (RIETI) which asked 15,000 manufacturing firms about the impacts of Trump tariffs and their planned or implemented actions. The sampling targeted manufacturing firms with 50 or more employees and a capital of 30 million yen or more. The survey period (April 4 to June 17, 2025) coincided with the Trump administration’s series of announcements of the reciprocal tariffs with Japan and five bilateral meetings between executive branches of Japan and the United States. A total of 1,855 firms responded, yielding a response rate at 12.4%.
The survey aimed to capture the impact of tariffs and business responses on various dimensions, such as how protectionist trade policy affects business strategies and structures.
Larger firms see Trump tariffs as “impactful”: Impact depths and disparity in responses
When asked about the impact of the Trump administration’s tariff hikes, 42.0% of the respondent firms reported that the Trump tariffs will affect their businesses (30.0% saw them as “some effect” and 12.0% as “large effects”) (Table 1). On the other hand, only 24.6% reported that the Trump tariffs will have “little” or “no effect.”
In particular, larger firms are more likely to report that the Trump tariffs will impact their businesses. Despite the fact that 770 firms or 42.0% of the respondents report the tariff hikes to affect their businesses, these affected firms accounted for 75.4% of total sales of responded firms and 64.3% of total employees. This means that the tariff’s impact on the Japanese economy would be larger than what the sheer proportion of firms that have reported to be affected.
The survey also documents the divergence in firm responses to tariffs (Table 2). 60.6% of the respondent firms indicated that they had not taken any action (or had no plan to take actions). Only a few firms (0.9%) reported that they had implemented strategies to address tariffs. On the other hand, 32.2% were “currently considering” taking actions to address the tariffs.
Firm size, again, seems to shape the divergence in firm responses, where larger firms are more likely to report that they have taken actions or are considering to take actions. Average sales per employee for firms considering to take actions on the Trump tariffs were higher at 62.133 million yen than average for the firms “not considering” any measures at the 39.810 million yen, suggesting that a firm’s exposure to tariffs as well as their responses vary along firm size and internal corporate resources. As discussed previously, the larger firms indicated more vulnerability to the Trump tariffs, which probably explains why they are more likely to implement or consider strategies to address tariffs. In other words, the magnitude of the impact incentivizes firms to take actions.
We note, however, that the corporate performance indicators used here are not strict productivity indicators or reflections of value added. It is also important to note that firm size, measured by productivity, sales, and employment, are not sole determinants of which firms implement strategies to address tariffs. Other factors such as industrial characteristics, supply chain structure, and relationship with parent firms also matter.
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Response measures center on price revisions with local production limited: Cautious response measures to Trump tariffs
Among specific response measures cited by firms that were considering or launching response measures or completed response measures (Table 3), the most frequently cited measure was the reduction of prices and costs for U.S.-bound products (cited by 43.8% of these firms), followed by the expansion of exports to third-country markets (24.0%). Firms that cited expanding U.S. production (which was likely the result the U.S. government hoped for) were limited to 8.5%. Only 3.1% cited new partnerships with or acquisition of U.S. firms.
The survey results highlight the possibility that many Japanese firms are unable to meet the U.S. strategy of exploiting tariffs to promote direct investment into the United States. Only a few large firms are taking aggressive measures such as localization and mergers and acquisitions. The majority of Japanese firms are implementing passive strategies such as cost reduction and export market restructuring. Only a few firms (2.0%) are taking steps to transform their business models (such as exporting services). Generally, Japanese firms are predominantly cautious about responding to the Trump tariffs.
The firm's financial capacity again shapes their responses. Only firms with relatively strong financial capacity are considering their business expansion abroad. On average, firms that are considering to expand production in the U.S. have made 103.618 million yen sales per employee and those that are considering partnership or merger and acquisitions with the U.S. firms have reported 163.146 million yen sales per employees. Furthermore, firms that indicated the plan to expand exports to third-country markets (24.0%) have made on average 59.340 million yen sales per employee, suggesting that more productive firms are better able to adjust their strategies and redirect their exports to third countries to avoid geopolitical risks.
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Firms at a crossroads: Cautious stance or structural transformation?
The survey results suggest that firm responses to external shocks are defined not only by the magnitude of their impact but also by firm-level attributes, such as size, business resources, and productivity. Firms that are actively responding to the Trump tariffs, such as investment expansion in the United States and market diversification, tend to leverage their resources such as international business operations and financial resources.
On the other hand, firms that have not yet taken action are exploring various options. In the open-ended responses in our survey, many firms cited their potential responses such as passing tariff hikes on to U.S. prices, collecting more information and assessing the impacts, asking parent firms to respond, and other measures that suggest cautious attitudes or reliance on existing regimes. While many firms are taking a wait-and-see attitude over the short term issue associated with rising prices, in the medium to long term, they may face deeper challenges such as the need to strengthen product value and organizational capacity to respond to crisis. Indeed, some firms cited improving productivity and closely assessing the trends among business partners, indicating that they saw the U.S. tariff hikes as an opportunity to launch structural reforms such as improving efficiency and reviewing supply chains.
Overall, the survey results indicate that whether the external pressure of tariff hikes will lead to a real turning point for Japanese firms depends on whether they can go beyond temporary response measures and address structural challenges from a long-term perspective, which would improve the quality of any future measures.
July 30, 2025
>> Original text in Japanese
