There is a risk that the recent tensions with China escalate into a full-blown trade spat akin to the conflict around the Senkaku islands in the early 2010s. There are several avenues through which this could play out, but the biggest risk is that China restricts exports of rare earths or imposes restrictions on Japanese exports. Carmakers look particularly vulnerable as they are already under enormous pressure from the ascent of Chinese electric vehicle manufacturers.
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