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Trump’s potential auto tariffs worry Japan and South Korea

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Following US President Donald Trump’s announcement that he would impose a 25% tariff on imported cars and auto parts, Japan’s Prime Minister sounded the alarm on Thursday.

Prime Minister Shigeru Ishiba told lawmakers during a parliamentary session, “We need to consider appropriate responses,” adding, “All options will be on the table.”

This move, seen as undermining a bilateral agreement made between Trump and then-Prime Minister Shinzo Abe in September 2019, came as a surprise to Japan. This limited trade deal had opened Japan’s market to more American agricultural products. The agreement states that the two countries “will refrain from taking measures contrary to the spirit of these agreements.”

Japanese automakers reacted cautiously to the announcement. Toyota, Subaru, Mazda, and Honda issued brief statements saying they were assessing the potential impact.

Imported cars and trucks are currently subject to tariffs of 2.5% and 25%, respectively. When the new tariffs take effect on April 3, these rates will rise to 27.5% and 50%. The 25% tariff will also apply to automotive parts like engines and transmissions, taking effect no later than May 3.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said the government intends to negotiate exemptions. Economists say it is unclear how exemptions might be secured, but there are several options.

According to economists, options Japan might consider include voluntary export restraints, a commitment to increase imports of items like natural gas, grain, and meat, and replacing Russian natural gas with gas from the US. In 2023, 8.9% of Japan’s natural gas imports came from Russia, while 7.2% came from the US.

“Japan will likely be looking at all these options,” said Koichi Fujishiro, a senior economist at the Dai-ichi Life Research Institute.

South Korea in a similar situation

South Korea is also expected to seek exemptions. Analysts said that South Korean automaker Hyundai Motor Group’s announcement earlier this week of a $21 billion US investment would help its negotiating position.

Esther Yim, a senior analyst at Samsung Securities, said, “The US has, in principle, applied a 25% tariff on all imported cars,” adding, “Washington can then negotiate with each country, and I think investment can be used as leverage.”

South Korea’s Ministry of Industry pledged an emergency response by April to help the country’s automakers, who are expected to face “significant challenges” when the tariffs take effect.

Over the years, global automakers have shifted to local production to avoid trade friction. According to the Mitsubishi Research Institute, 60% of Japanese cars sold in the US are produced in the US. This figure drops to 40% for Korean cars. For European brands, the rate is as high as 70%.

Although Ishiba insists all options are on the table, few analysts expect Japan to resort to retaliatory measures, at least at this point. “Japan would gain very little by retaliating against US tariffs,” Fujishiro said.

At a summit with Trump in February, Ishiba pointed out that Japan is the largest investor in the US and a significant job creator, promising to work towards increasing Japan’s investment balance from $783.3 billion in 2023 to $1 trillion.

Cars, Japan’s largest export item to the US, are worth 6 trillion yen ($40 billion) and will account for 28% of Japan’s total exports in 2024. This amount is equivalent to 1% of Japan’s nominal gross domestic product.

Takahide Kiuchi from the Nomura Research Institute estimates that a 25% tariff would reduce Japan’s car exports to the US by 15% to 20% and lower Japan’s GDP by 0.2%.

If Japanese automakers try to respond by shifting production to the US, this would reduce domestic employment and hollow out the country’s economy in the long run.

Masanori Katayama, chairman of the Japan Automobile Manufacturers Association, said at a press conference last week, “Car exports from Japan are necessary to supplement the domestic production of Japanese automakers and to provide a lineup of attractive cars… to meet the diverse needs of American customers through car dealerships in every US state.”

Katayama said that when the US implements the tariff, “a significant production adjustment is expected. The Japanese auto industry consists not only of automakers but also parts suppliers and employs 5.5 million people.”

Katayama insisted that the industry and the Japanese government must come together to take action and keep domestic supply chains intact.

The tariffs are also expected to harm American automakers because they too source parts and manufacture globally to keep costs down and make their cars competitive in the market.

Nomura analyst Anindya Das said General Motors could fall into an operating loss on an annual basis due to its reliance on factories in Mexico. He added that Toyota could also see a 30% drop in operating profit.

Jennifer Safavian, president and CEO of Autos Drive America, an industry group representing international automakers operating in the US, including Toyota, Honda, Nissan, and others, said, “Tariffs imposed today will make it more expensive to produce and sell cars in the US, ultimately leading to higher prices, fewer choices for consumers, and fewer manufacturing jobs in the US.”

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India intel push on China risks dangerous miscalculation, study says

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A Chinese scholar has warned that Indian intelligence agencies increasingly treating China’s routine activities as threats raises the risk that New Delhi could miscalculate and adopt “unilateral countermeasures” against Beijing.

According to Zhao Ruoxi, a researcher at the Macau University of Science and Technology, India stepped up its intelligence-gathering operations following the deterioration of relations with neighbouring China in recent years.

Zhao made the assessment in an article analysing Indian intelligence operations targeting China across the 2020–2026 period. The study was published in the 31 July issue of the Chinese-language Journal of Intelligence, issued by the Shaanxi Information Institute of Science and Technology, and reported by the South China Morning Post.

According to Zhao, China’s political and economic presence in South Asia, its emphasis on emerging technologies, and its naval activities in the Indian Ocean have been monitored more closely by India since a 2020 border clash.

In that clash in the Galwan Valley, 20 Indian and four Chinese soldiers were killed, dragging relations between the two countries to one of their lowest points in history.

Zhao noted that India has expanded its intelligence collection tools in recent years, drawing on space-based reconnaissance systems, drone surveillance, and cyber intelligence to establish a multi-agency network targeting China.

According to the article, India has also cooperated with the US and Middle Eastern nations to enhance its capacity to track Chinese naval operations in distant waters and exert informational pressure along Beijing’s maritime energy supply routes.

However, Zhao described India’s heavy reliance on foreign-sourced data as a “structural weakness”, arguing that it leaves New Delhi’s assessments of China vulnerable to the strategic agendas of third parties.

Zhao observed that while relations between Beijing and New Delhi began to improve in late 2024, India’s expanded intelligence activities directed at China have persisted.

The two countries took steps to mend ties after reaching an agreement in 2024 on resuming border patrols. Direct flights resumed after a five-year hiatus, Beijing once again permitted Indian pilgrims to visit the Tibet Autonomous Region, and India resumed issuing visas to Chinese tourists.

Last year, in another sign of easing tensions, Indian Prime Minister Narendra Modi visited China for the first time in seven years. In his meeting with Modi in Tianjin, Chinese President Xi Jinping said border issues should not define bilateral relations.

Following the reopening of the Lipulekh Pass in June, which Beijing viewed as a goodwill gesture, the two countries also resumed cross-border trade in August through the Himalayan passes of Nathu La and Shipki La.

In the article, Zhao stated that India is expected to ramp up technical surveillance in border areas, which will compel China to bolster its information security.

Zhao also warned that New Delhi could “systematically disrupt” Beijing’s diplomatic engagements with its South Asian neighbours, particularly its efforts to build regional trust and advance projects under the Belt and Road Initiative.

According to Zhao, the expansion of India’s intelligence operations against China heightens the risk of miscalculation, as routine Chinese activities are increasingly perceived as threats.

“As a result, the likelihood of triggering unilateral countermeasures increases,” Zhao assessed.

Zhao said China must make its strategic messaging more effective and reinforce communication with South Asian states and Indian Ocean littoral nations to counter this pressure.

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China and Arab states launch 5-year anti-desertification plan

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China and Arab nations have launched a five-year action plan to combat drought, desertification, and land degradation. According to information provided by China’s National Forestry and Grassland Administration (NFGA) to the Global Times on Sunday, the plan will extend bilateral cooperation beyond traditional anti-desertification efforts to encompass technological innovation in areas including grassland conservation, watershed management, and wetland protection.

The plan was inaugurated during a meeting convened on the sidelines of the 17th session of the Conference of the Parties (COP17) to the United Nations Convention to Combat Desertification, which is currently taking place in Ulaanbaatar, the capital of Mongolia.

According to an NFGA press release sent to the Global Times, China and Arab countries will, under the action plan, deepen practical cooperation over the next five years across key areas such as the restoration of desertified and degraded land, sand and dust storm monitoring and early warning systems, grassland management, biodiversity conservation, as well as wetland protection and restoration.

The two sides will also accelerate technological innovation and the practical application of research findings by establishing platforms to share technology, data, and research outcomes, conducting interdisciplinary studies, and developing technologies such as remote sensing and intelligent assessment of land degradation. The plan further envisages the establishment of demonstration bases to support the implementation of the UN Convention to Combat Desertification.

Under the plan, the sides also aim to strengthen China-Arab cooperation networks in combating desertification, enhance mechanisms for sharing policies, technologies, and research findings, and expand partnerships within the framework of China’s proposed Belt and Road Initiative. The participation of governments, research institutions, enterprises, social organisations, and local communities will be encouraged throughout the process.

Cooperation in capacity building will also be expanded through exchange programmes for young professionals, joint research, field demonstrations, and technical training sessions.

The meeting was jointly organised by China’s National Forestry and Grassland Administration and the General Secretariat of the Arab League, while the Chinese Academy of Forestry and the China-Arab International Research Centre for Drought, Desertification and Land Degradation undertook the event’s organisation.

Cui Lijuan, vice president of the Chinese Academy of Forestry, stated that several initiatives have already begun to materialise. For example, China and Egypt are exploring the possibility of conducting a comparative study examining the Yellow River and Nile River basins to share expertise in ecological conservation and integrated watershed management.

According to Cui, the initiative in question has secured the backing of the Chinese Academy of Forestry and attracted interest from international non-governmental organisations.

Future cooperation between China and Arab countries will also focus on desertification monitoring and early warning systems, ecological technologies, as well as exchange and training programmes for young specialists.

Cui noted that the two sides also aim to broaden participation by integrating businesses, social organisations, and international institutions into the cooperation framework, which is currently led primarily by state bodies.

According to Xinhua, the China-Arab International Research Centre for Drought, Desertification and Land Degradation was inaugurated in 2023 during an international forum on combating desertification. The establishment of the centre was viewed as a demonstration of China’s commitment to sharing the expertise gained from its anti-desertification efforts in the Kubuqi Desert.

According to the NFGA, the centre has steadily strengthened regular cooperation mechanisms between China and Arab countries over the past three years. While the two sides have jointly developed Earth observation systems and intelligent decision-support tools for land degradation, China has compiled 30 practical anti-desertification technologies across six categories suitable for application in Arab countries.

The centre has also established regular communication and exchange channels with several countries, including Saudi Arabia and Egypt. In addition, it has set up an initial China-Arab anti-desertification network and expert pool to support sustainable technical cooperation and professional training in Arab nations.

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China outpaces India in race for Russian crude oil supplies

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China has accelerated its crude oil purchases from Russia to replace oil shipments originating from the Middle East.

According to a Reuters report based on data from energy analytics firm Kpler, China is outpacing India in the Russian oil market.

India’s crude imports from Russia’s European ports fell by approximately 30% in August.

Beijing’s increased purchases could curb India’s exports of refined petroleum products and consequently trigger a diesel and gasoline shortage across Asia.

While China previously favoured ESPO blend crude shipped from Russia’s Asian ports, the share of its purchases from Russia’s European ports, consisting primarily of the Urals grade, has climbed to 31%.

Russian crude imports by India, the world’s third-largest oil importer, dropped to 1.87 million barrels per day in August. This volume remained well below the 2.79 million barrels per day recorded in July.

Under this scenario, which poses a risk to the Asian region, India stands as the region’s largest exporter of diesel and gasoline.

However, the country’s total crude imports in August were recorded at 4.17 million barrels per day. This figure marked the lowest level since the outbreak of conflict in the Middle East.

If the tightening raw material supply prevents Indian refineries from maintaining processing throughput, a severe deficit in refined products could emerge across the Asian market starting in September.

The Times of India previously reported that India’s Russian crude imports reached their highest share since 2022 in July.

During that period, Russia supplied more than half of India’s total crude imports of just over 5 million barrels per day, delivering 2.8 million barrels per day.

At the end of July, the Russian government extended its temporary export ban on gasoline, diesel, and other fuel types until 31 January 2027.

Under the restrictions that took effect on 1 August, direct exports of diesel, marine fuel, and gas oils by refiners will be exempted starting 1 September.

Bloomberg reported in June that Russian Urals crude was being sold in India at a $3.90 discount per barrel against international benchmarks after a hiatus of more than two months.

Urals crude traded at a discount again on 29 May for the first time since mid-March.

According to The Times of India, however, this discount on Russian Urals crude had almost entirely evaporated by early August.

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