Why Trump's Japan Car Idea Reveals a Broken Market

When Donald Trump suggested importing Japan's tiny kei cars to tackle rising U.S. vehicle costs, it wasn't just political theater. It exposed a fundamental disconnect in America's auto market—one that's been two decades in the making.

The Great American Car Inflation

The numbers tell a stark story. In 2000, sedans and compact cars made up roughly half of U.S. auto sales. Today, trucks and SUVs command over 80% of the market. The average new vehicle price has soared to $48,000, while Japanese kei cars cost around $15,000.

This wasn't an accident. It was a strategic pivot by automakers chasing profits. A compact car might generate $1,000 in profit per unit, while a pickup truck can deliver $10,000 or more. Ford stopped making sedans entirely for the U.S. market. General Motors gutted its small car lineup.

The result? American consumers face a market where affordable, efficient transportation has largely disappeared from showroom floors.

When Regulation Meets Reality

The shift wasn't driven by consumer demand alone. U.S. fuel economy standards created perverse incentives—larger vehicles faced more lenient efficiency requirements. Automakers found it easier and more profitable to build bigger rather than cleaner.

Meanwhile, years of low interest rates made expensive vehicles seem affordable through extended financing. 84-month loans became standard, masking the true cost of vehicle ownership. Monthly payments stayed manageable, but total purchase prices skyrocketed.

Now that dynamic is reversing. With interest rates rising and inflation biting, auto loan delinquency rates have climbed to 6.1%. Many consumers are priced out entirely, creating pent-up demand for affordable alternatives that simply don't exist.

The Kei Car Solution—and Its Limits

Japanese kei cars represent everything the U.S. market isn't: small (maximum 11 feet long), efficient (60+ mpg), and cheap. They're purpose-built for urban mobility, not highway cruising or weekend camping trips.

But importing them isn't straightforward. U.S. safety standards would require significant modifications, potentially doubling their cost. Cultural barriers matter too—Americans have been conditioned to equate vehicle size with safety and status.

The real question isn't whether kei cars can save the U.S. market, but whether their absence reveals a market failure. When automakers collectively abandon entire price segments, consumers lose choice.

Winners and Losers in the New Reality

This shift created clear winners and losers. Automakers enjoyed record profits during the pandemic as they focused on high-margin vehicles. Wealthy consumers got more luxurious trucks and SUVs than ever before.

But working-class families, young buyers, and urban dwellers got squeezed out. The used car market, traditionally the safety valve for budget-conscious buyers, saw prices surge 40% during the pandemic and remain elevated.

Foreign automakers like Hyundai and Toyota maintained some small car presence, but even they've shifted toward crossovers and SUVs to chase profits.