To deal with previous trade disputes and related problems, Japanese manufacturers moved their production bases to other countries to get out of harm’s way.

But the “reciprocal” tariffs imposed by U.S. President Donald Trump affect pretty much the entire world, leaving no “safe haven” for the companies.

For some exporters, even Japan, with its high labor costs, has become an attractive manufacturing hub.

Trump’s “reciprocal” tariffs took effect on April 9, including a 24-percent rate on Japan, raising fears of further turmoil in financial markets, disruptions in supply chains, and a meltdown of the global economy.

Of prominent concern is that Trump, angered by Beijing’s retaliatory measures, raised the U.S. tariff on China to 104 percent, effectively escalating a trade war between the world’s two biggest economies.

Tamron Co., a Japanese optical lens manufacturer, had adjusted to U.S.-China trade tensions during the first Trump administration.

To avoid fallout from that dispute, the Saitama-based company moved its manufacturing bases from China to Vietnam for products headed to the United States.

The relocation to Vietnam was aimed at mitigating geopolitical risks, such as a Taiwan contingency and U.S. tariffs imposed on products made in China.

Trump returned to the White House in January this year, when Tamron opened its second factory in Vietnam by investing around 4 billion yen ($27.5 million).

Once the factory becomes fully operational in 2028, Tamron’s production capacity will increase by 20 percent compared to 2024, and 45 percent of its products will be made in Vietnam.

In February, talks about U.S. tariffs emerged, but Tamron thought the impact would be minor, believing Trump was only targeting China, Mexico and Canada.

The Trump administration initiated the first stage of its tariffs on April 5, imposing a minimum 10-percent rate on imported products from almost all countries and regions.

The second stage of “reciprocal” tariffs took effect on April 9, applying higher tax rates on products from certain countries.

The reciprocal tariff rate imposed on Vietnam is 46 percent, nearly double the rate for Japan.

“We don’t know the impact yet, but if we do nothing, our profits will decrease,” a Tamron official said.

The company said it would consider raising prices while watching what other companies do. Tamron is also exploring the possibility of transferring production to new locations.

MOVE TO SOUTHEAST ASIA

In the 2010s, Japanese factories and plants in China faced anti-Japan riots and labor disputes. The companies started to diversify their investments to other countries and regions in a strategy called “China Plus One.”

Southeast Asian countries became popular alternatives because of their easy access to both Japan and China for raw materials and parts. Labor costs in Southeast Asia are also relatively low.

After World War II, Japanese companies moved their factories from high-cost urban areas to rural regions where land prices were lower and cheap labor was abundant.

The companies also expanded into Thailand, Vietnam and Indonesia.

In recent years, a growing number of Japanese companies have established bases in Cambodia and Laos, countries previously overlooked as relocation destinations.

However, Trump, frustrated with his country’s trade deficits, decided to impose reciprocal tariffs on all of these Southeast Asian countries.

BACK TO JAPAN?

Japanese companies that expanded overseas have generally weathered supply chain disruptions caused by the COVID-19 pandemic and U.S.-China trade friction.

But many of these companies have no idea how to deal with the Trump tariffs.

The battle between Washington and Beijing has further increased the risk of investing in China.

If the companies set up shop in Japan for exports to the United States, they face labor shortages and the effects of exchange rate fluctuations.

The United States remains the most important market for Japanese exporters. There are currently very few candidate countries that could replace the United States in this regard.

Electronic parts maker Iriso Electronics Co. manufactures products destined for the United States in Vietnam, China, the Philippines and Japan.

The company said it decided in spring to triple its production capacity in Japan in response to Trump’s tariff policy.

The company also said it will increase production in countries hit with lower U.S. tariffs, meaning manufacturing could shift away from China.

Trump has said the tariffs are designed to bolster manufacturing in the United States.

If Japanese companies set up factories in the United States, they can avoid the impact of tariffs on their goods sold in the U.S. market.

However, Ken Kobayashi, chairman of the Japan Chamber of Commerce and Industry, on April 8 said this may be wishful thinking on the part of the U.S. president.

“It is realistically difficult to move all manufacturing supply chains to the United States because we are not sure if it is possible to restart production in a place with fewer skilled technicians to make it run efficiently,” Kobayashi said.

Some companies already with factories in the United States are considering reviewing their supply chains.

Nissin Foods Holdings Co., which is scheduled to start operations at its third factory in the United States in August, is reportedly switching to locally sourced ingredients.

(This article was written by Takehiro Tomoda, Kenichiro Shino and Makoto Tsuchiya.)