Trump Secures Japan Tariff Deal in Return for $550 Billion Investment Package
By Staff, Agencies
US President Donald Trump has announced a major trade agreement with Japan, reducing tariffs on auto imports while avoiding additional levies on other Japanese goods.
In return, Japan has pledged a substantial $550 billion in investments and loans aimed at bolstering US-bound projects and supply chains.
The deal is the most consequential of several Trump-era trade agreements since his administration imposed global tariffs in April. Under the new terms, tariffs on Japanese automobiles, which form a significant portion of Japan’s exports to the US, will be reduced from 25% to 15%. Planned duties on other Japanese goods that were set to take effect on August 1 will also be cut by the same margin.
Japan’s benchmark Nikkei stock index responded with enthusiasm, jumping over 3% to a year-high. Leading the rally were automakers Toyota and Honda, which gained over 14% and nearly 12% respectively.
“I just signed the largest TRADE DEAL in history with Japan,” Trump posted on his Truth Social account. He emphasized that the agreement will strengthen the longstanding relationship between the US and Japan.
Japanese official Ishiba, reportedly on the verge of resigning after an election defeat, described the deal as the most favorable among countries with a trade surplus with the US. He explained that Japanese government-backed institutions will provide the $550 billion in loans and guarantees to help Japanese companies build resilient supply chains in sectors like semiconductors and pharmaceuticals.
The agreement also includes increased Japanese purchases of US agricultural products, including rice. Ishiba noted that while the volume of US rice imports may grow, the deal does not compromise Japan’s domestic agriculture sector.
Financial markets across Asia responded positively, with South Korean automaker stocks rising amid hopes of a similar deal with the US. The yen strengthened slightly, and European and US stock futures also ticked up.
However, US automakers voiced frustration. Industry representatives criticized the deal for maintaining a 25% tariff on vehicles imported from North American plants—despite their high US content—while reducing tariffs on Japanese imports with little or no US content. Matt Blunt of the American Automotive Policy Council, which represents General Motors, Ford, and Stellantis, called the agreement “a bad deal for US industry and US auto workers.”
The imbalance in US-Japan automotive trade has long irked Trump. In 2024, the US imported over $55 billion in Japanese vehicles and parts, while exporting just $2 billion worth of similar goods to Japan. Total two-way trade reached nearly $230 billion that year, with Japan maintaining a $70 billion trade surplus.
The announcement followed a meeting between Trump and Japan’s chief negotiator Ryosei Akazawa at the White House. Akazawa confirmed that the agreement excludes Japanese steel and aluminum, which remain subject to 50% tariffs, and includes no commitments on defense spending.
Analysts view the deal as a strategic win for Japan, which avoided harsher penalties. Economists in Tokyo noted that the lowered tariff rate could help Japan avoid slipping into recession.
Japan is the largest foreign investor in the US, with direct investments totaling $1.2 trillion by the end of 2024, and an additional $137 billion invested across North America that year. Combined with institutional investors like GPIF and major insurers, Japan holds about $2 trillion in US markets.
In a separate announcement, Trump revealed that Japan is also set to partner with the US on a long-sought natural gas pipeline project in Alaska. "They're forming a joint venture with us... they're all set to make that deal now," he said.
With an August 1 deadline looming, Trump’s team is racing to finalize trade agreements. He has already announced preliminary frameworks with the UK, Vietnam and Indonesia, and paused tariff escalation with China, although full terms remain under negotiation.
European Union trade representatives are expected in Washington next for further talks.
