Trump Announces Major Trade Agreement with Japan, Reducing Tariffs on Imports

Recently, U.S. President Trump announced that the United States has reached a trade agreement with Japan, setting tariffs on Japanese imports at 15%, while Japan will invest $550 billion in the U.S. After announcing the deal on social media, Trump stated at an event in the White House: "I have just signed the largest trade agreement in history with Japan. Japan sent their top-level representatives, and we reached this mutually beneficial agreement after long and hard negotiations." On his platform Truth Social, Trump claimed that the agreement would encourage Japan to "fully open its market," allowing more American cars and agricultural products like rice to enter, although he did not disclose further details. Trump has consistently focused on the automotive trade between the two countries, expressing concerns over the trade imbalance, with approximately 80% of Japan's trade surplus with the U.S. coming from cars and automotive parts. Key details of the preliminary U.S.-Japan agreement remain unclear, particularly whether Japanese cars and parts will receive an exemption from the additional 25% tariff. Japanese public broadcaster NHK reported, citing a government official, that the U.S. will also lower the tariff rate on the Japanese automotive industry to 15%. Following this announcement, shares of Japanese automakers surged in the Tokyo stock market, with Toyota's stock rising over 11% and Honda's stock up by 9%. Japanese Prime Minister Shigeru Ishiba stated in Tokyo: "Japan and the U.S. have been closely negotiating to protect our respective national interests. The two countries will continue to work together to create jobs and high-quality products." Earlier this year, Trump initially threatened to impose a 24% tariff on Japanese imports, which he later raised to 25% in a letter earlier this month, indicating that Japan's chief trade negotiator, Akira Amari, had not made significant progress during multiple visits to the U.S. The automotive trade issue has always been the most prominent sticking point in U.S.-Japan trade negotiations. U.S. trade negotiators have urged Japan and other countries to accept cars produced according to U.S. federal motor vehicle safety standards rather than adhering to different standards. Japanese and other countries' negotiators have been striving to obtain exemptions from the 25% tariff imposed by Trump on cars and automotive parts. It remains unclear whether the U.S. will establish a similar exemption policy for Japan like the planned tariff quotas on steel imports from the UK. NHK's report did not provide further details. Japanese automakers have developed significant investment plans in the U.S., including Isuzu's $280 million investment in a new plant in South Carolina, and Toyota's commitment to invest $88 million to increase hybrid vehicle production. The U.S. is also offering tariff incentives for car manufacturers setting up plants domestically, which is a crucial part of its strategy to bring manufacturing back. However, following the trade agreement between the U.S. and Japan, the American automotive industry organization raised concerns about the deal. The American Automotive Policy Council (AAPC), representing General Motors, Ford, and Stellantis (Chrysler's parent company), pointed out that the agreement aims to reduce the import tariff on Japanese cars to 15%, while the U.S. maintains a 25% tariff rate on Canadian and Mexican imports. AAPC Chairman Matt Blunt stated: "We are assessing the details of the agreement, but any agreement that allows Japanese imports with almost no American parts to enjoy lower tariffs than North American manufactured vehicles containing a significant amount of American parts is a serious injustice to the American automotive industry and workers." The Trump administration has threatened to raise tariffs on Mexican cars to 30% and Canadian tariffs to 35% by August 1. Recently, General Motors disclosed that it lost $1.1 billion in the second quarter due to tariff impacts, and it expects conditions to worsen in the third quarter. Stellantis indicated that U.S. tariffs on imported complete vehicles and parts are expected to have a larger impact in the second half of 2025, and the company has already incurred losses of 300 million euros (approximately $352 million) due to reduced vehicle deliveries and adjustments to production levels. In May, the AAPC criticized the trade agreement reached between the Trump administration and the UK, stating it would harm the interests of the U.S. automotive industry. According to the agreement, UK automakers can obtain a tax-free export quota of 100,000 cars per year (close to the total amount exported from the UK to the U.S. last year), with a reduced tax rate of only 10%. The council pointed out: "This will harm the interests of American automakers, suppliers, and workers."