As the United States continues building economic towers out of tariffs, another move by President Donald Trump has sent Japan’s economy drifting back toward recession. According to a Bloomberg survey, Japan’s GDP likely fell by 1.2% in the third quarter of 2025, marking the first contraction after five consecutive quarters of growth, as the economy appears to be catching its breath.
The primary reason is that Japan’s export ships are now colliding head-on with the iceberg of newly imposed 15% US tariffs. While the rate is less than the initially threatened 25%, it is still high enough to seriously pressure Japanese manufacturers. Auto exporters were hit especially hard—Toyota, Honda, and Nissan have been forced to slash prices as they grapple with the tariff blow, trying not to become symbols of an impending industrial crisis.
Industrial output in Japan has cooled slightly, electronics sales have dipped, and retail spending has pulled back, despite hopes for continued momentum. Some are now looking to newly appointed Prime Minister Sanae Takaichi not for ceremonial gestures, but for robust economic stimulus to counter the impact of the tariffs and help pull Japan’s GDP back on track.
Making matters worse, inflation—currently double the Bank of Japan’s goal—is tightening the squeeze on household budgets. Japanese consumers are increasingly forced to choose between staples like rice and tech products.
At this rate, Japan may become the first major allied economy to be seriously undermined by US tariffs, as Trump’s trade policy is delivering a particularly painful blow to the world’s fourth-largest economy.
