Business leaders around the world are closely watching the still-evolving policies of U.S. President Donald Trump, wondering how coming changes may affect their operations.

Japan’s business community is no exception, most notably the auto sector, a key industry for the country.

Since Trump attacked Toyota Motor Corp. on Twitter earlier this month, threatening Japan’s biggest carmaker with tariffs on U.S.-bound cars made in Mexico, concerns have grown over the impact of protectionist trade policies.

The industry does see some positives, though, including a pledge to boost the U.S. economy through measures like a drastic corporate tax cut. But observers caution that it’s too early to tell whether the new administration’s policies will be a boon or a headache for Japanese carmakers, as too many factors remain unknown.

It’s clear, however, that Trump’s protectionist trade stance wasn’t just talk; it has already been posted on the White House website. On Monday, Trump signed an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership and has said he wants to renegotiate the North American Free Trade Agreement.

Of immediate concern for some Japanese carmakers is the fate of NAFTA, a free trade pact among Canada, the United States and Mexico. Taking advantage of the deal, Mexico has become an important production base for makers like Toyota, Honda Motor Co., Nissan Motor Co. and Mazda Motor Corp.

But Trump has repeatedly said he will impose tariffs on cars imported from Mexico.

“The carmakers would have to raise the prices of those imported cars, so it would weaken their price competitiveness in the U.S. market,” said Shigeru Matsumura, a senior analyst at SMBC Friend Research Center.

Analysts said Nissan is likely to be hit hard by the potential border tax. The Yokohama-based automaker runs three factories in Mexico.

Nissan sold about 1.5 million cars in the U.S. in 2016, according to weekly newspaper Automotive News, but a company spokesperson declined to specify the rate of cars imported from Mexico. Media reports have put the figure at 25 percent.

Nissan CEO Carlos Ghosn has said that the firm would deal with any changes to NAFTA realistically.

Mazda is also expected to face impacts, analysts said. The Hiroshima-based automaker operates one factory in Mexico and imports more than 10 percent of the cars sold in the U.S. from there, a company spokesperson said.

Mazda has no factories in the U.S., so the Mexico plant — which also makes cars for Europe — is a strategically important production base.

Mazda President Masamichi Kogai said earlier this month that the firm has no plans to make changes related to the Mexico factory.

Toyota, which was criticized by Trump for its plan to build a new factory in Mexico, currently operates one plant there that manufactures the Tacoma pickup truck. The plant produces about 90,000 units annually, a small portion given that Toyota sold 2.4 million cars in the U.S. in the last year.

Toyota is set to move Corolla model production from Canada to a new plant in Mexico that will manufacture about 200,000 units of it annually from 2019.

After Trump’s online criticism, Toyota released a statement saying the new Mexico plant will not take jobs from the U.S. and stressed its contribution to the country.

“With more than $21.9 billion direct investment in the U.S., 10 manufacturing facilities, 1,500 dealerships and 136,000 employees, Toyota looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry,” it said.

It is true that Japanese makers running production bases in Mexico face a risk, but analysts said that the situation is the same for other carmakers.

“Ford and GM are also making small cars (in Mexico). I think it wouldn’t be only Japanese makers that would be affected,” said Yoshihisa Noro, research director of management consulting division at Mitsubishi Research Institute.

While Trump is calling on manufacturers to create production bases in the U.S., analysts said that’s an unlikely scenario for Japanese automakers.

“Economically speaking, I don’t think that’s viable. Employment costs are expensive and labor unions are quite powerful in the U.S., so it would be hard to cut the costs,” said Matsumura.

Noro said many Japanese carmakers, including Mazda, Mitsubishi Motors Corp. and Isuzu Motors Ltd., built plants in the U.S. in the 1980s but withdrew because they could not sell the volumes needed to make the plants cost-effective.

“They had a hard time back then. So it would be difficult for them to build (production bases) again unless they are really confident that they can sell a large volume there,” said Noro.

While trade policy is a point of concern, other Trump policies are seen in a more positive light.

Trump has vowed to energize the U.S. economy with a $1 trillion investment in infrastructure and a cut in corporate taxes to 15 percent from the current 35 percent.

It remains unclear whether Trump can fully implement these policies, but economists have said he will likely make some degree of progress, contributing to a promising overall outlook.

Thus, “consumption will be stimulated and more people will buy cars, although it’s based on a premise that the prices will stay at the current levels,” said Matsumura.

If the U.S. economy booms, the yen’s value against the dollar is expected to stay weak, another plus for export-driven Japanese automakers.

Still, it’s hard to know whether Trump’s stimulus measures and the weak yen would offset the possible negative effect of his trade policy, as the fate of NAFTA and other policies is anyone’s guess.

“I wouldn’t say it’s unclear,” said Matsumura. “Rather, it’s unpredictable.”

This series looks at Japan’s efforts to assess the policies of U.S. President Donald Trump.