US President Donald Trump announced a “massive” trade deal with Japan, marking a significant development in the two countries’ months-long negotiations. According to the agreement, the US will impose a 15% tariff on Japanese exports, while Japan will invest $550 billion in the US. Trump described the deal as “perhaps the largest Deal ever made,” with Japan committing to receive 90% of the profits from these investments.
The deal also includes Japan opening up to US exports of cars, rice, and certain agricultural products, potentially creating “hundreds of thousands of jobs.” US Secretary of the Treasury Scott Bessent hailed the agreement as a “historic agreement,” reaffirming the commitment to deepening the US-Japan alliance.
The 15% tariff rate on Japanese exports is seen as “relatively good news” for Japan, according to William Chou, deputy director of the Japan Chair at the Hudson Institute. Japanese auto stocks soared following Trump’s announcement, with Mazda rising over 17% and Toyota, Nissan, and Honda up by 8.5-12%. Japan’s benchmark Nikkei 225 index rose nearly 3%.
However, the deal does not cover Trump’s auto tariffs, including 50% duties on aluminum and steel, which will remain in place. Japan was facing a 25% duty on most exports if a deal wasn’t reached by August 1. Japanese Prime Minister Shigeru Ishiba said he would “carefully examine” the agreement’s details but believed it was in Japan’s national interest.
The US-Japan trade deal is significant, given Japan is the world’s fourth-largest economy and the US’s fifth-largest trading partner. In 2024, the US imported $148.2 billion worth of Japanese goods, while Japan bought $79.7 billion worth of US products. Economists note that the deal reflects the current economic climate, where markets are more accepting of tariffs. Brian Jacobsen, chief economist at Annex Wealth Management, said, “It’s a sign of the times that markets would cheer 15% tariffs. A year ago, that level of tariffs would be shocking. Today, we breathe a sigh of relief.”
Trump’s tariff strategy has been a central part of his foreign policy, aiming to strengthen the US economy and negotiate better trade deals. However, critics argue that tariffs can have negative impacts on the global economy and specific industries. Trump’s recent tariff announcements include¹ ²:
- Countries with new tariffs:
- Algeria, Libya, and Iraq: 30% tariffs
- Brunei and Moldova: 25% tariffs
- Philippines: 20% tariffs (adjusted from 17%)
- Brazil: 50% tariffs on all imports, following a public spat with President Luiz Inácio Lula da Silva
- Other trade developments:
- China: China has hiked tariffs on US goods to 125%, responding to Trump’s tariff measures
- EU and Mexico: Trump announced 30% tariffs on Europe and Mexico, sparking concerns about a potential trade war
Overall, the US-Japan trade deal reflects Trump’s efforts to reshape global trade dynamics and prioritize American economic interests. As the deal’s details are scrutinized, its impact on the global economy and trade relationships will continue to unfold.