Japanese Firms Sony and Suntory Boost US Inventory in a Bid to Reduce Tariff Impact

Sony and drink manufacturer Suntory are storing up inventory in the US to cope with import tariff threats, Reuters reported. The two companies have opted for this strategy to reduce Japan tariff impact on Sony and Suntory even as their peers shift to supply chains and products.

Corporate Reactions

Oxford Economics’ Senior Norihiro Yamaguchi said that corporations are increasingly becoming aware that Japan faces Trump tariff threat. Yamaguchi underscored the warning by the US on the use of tariffs to eliminate any competitive disadvantage to its companies if China and Japan continue undervaluing their currencies.

Earlier this week, US President Donald Trump indicated that Tokyo could be next after imposing import tariffs on China and Mexico. Honda’s move to manufacture a new model of its high selling vehicles in the US instead of Mexico indicates the scale of Trump’s tariff threat for Japan. Leading LCD screen supplier, Japan Display has said that it’s already considering shifting manufacturing functions for some of its items to the US to avoid tariffs.

A survey conducted recently showed that hundreds of Japanese companies are considering making similar moves. The Japanese company supplies screens to the auto industry. Murata Manufacturing and Alps Alpine are focusing on insulating supply chains from the rising trade tensions. The two Japanese companies are major suppliers of the US iPhone manufacturer, Apple.

US-Japan Economic Relations

Trump has made public his plans to introduce reciprocal duties globally. Japanese firms are exposed to tariffs because for decades now, the majority have concentrated on overseas sales. The US is one of the leading export markets for these firms as it seeks to counter the effects of a shrinking population and slowing domestic demand.

Out of 10 Japanese businesses, 9 expect Trump duties to affect their revenue. Majority of these companies see Trump’s trade strategy as the most detrimental factor while 26% of them view China-US trade tensions as having a big impact. With the reality of tariffs dawning on Japanese companies, over 300 firms that do not have a presence in the US say they would set up operations in the country.

“Concerns about future U.S. tariff policies were frequently mentioned in our interviews,” said Hirotoshi Ito, who was involved in a survey conducted by the Japan export-promotion agency – JETRO.

Different Strategies

As some firms react to Trump’s policies for Japanese businesses by establishing operations in the US, others have already started accumulated products there. Last month, Hiroki Totoki, President of Japanese electronics giant Sony, said his company was preparing for Trump’s tariffs by increasing inventory from its US electronics and gaming divisions.

Drinks maker Suntory says its also doing the same. The company has shipped tequila from Mexico to the US as it expects implementation of a 25% duty imposed on imports from Canada and Mexico. The company is also weighing the decision to shift sales and marketing of its Scotch whiskies from the US to Europe and focus on selling more American whiskey in the US market.

Some companies have opted to shift supply chains to avoid the uncertainty created by trade spats. Smartphone camera actuators maker Alps Alpine says it plans to shift production to Japan as a way of shielding it from duties that third-party countries impose.