Sunday, March 30, 2025

Limits on Japanese car imports in the 1980s actually allowed them to compete better against the larger cars made by U.S. companies

See China Explores Limiting Its Own Exports to Mollify Trump: Chinese officials weigh Japan’s 1980s strategy—restraining exports while charging more—for products such as electric vehicles or batteries by Lingling Wei of The WSJ. Excerpts:

"Japan first agreed to limit exports of cars in 1981. Exports fell by about 8% from the previous year as a result. Doug Irwin, an economics professor at Dartmouth College and author of “Clashing over Commerce,” notes that the restraints were particularly binding in the mid-1980s. But by the early 1990s, the VER was no longer needed, in part because by then Japanese companies were building cars for the U.S. market at local transplant operations.

One reason Japan was willing to limit exports was that its companies could charge a higher price per car on a smaller number of cars sold, Irwin says. The price of an average Japanese car rose by about $1,000, roughly $3,500 in today’s dollars, and Japan also began to export larger, higher quality cars as a result of the restraints." 

"As Irwin points out, the premium charged by Toyota and other Japanese exporters back then gave them the profits to finance an upgrade from smaller, cheaper vehicles to larger, more profitable cars that competed more directly with their American counterparts."

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