On Tuesday evening, President Donald Trump made a big announcement regarding a long-anticipated trade deal with Japan, presenting it as a breakthrough for both nations that many thought would never happen.
During a gathering with Republican lawmakers, Trump stated, “I just signed the largest trade deal in history; probably the biggest deal ever with Japan.”
He elaborated how top representatives from Japan participated in the discussions, emphasizing the effort put into reaching this agreement. “It’s a fantastic deal for everyone involved,” he said.
As part of this agreement, U.S. importers will now incur a 15% “reciprocal” tariff on Japanese products entering the United States, a particularly advantageous arrangement for Japan. This new tariff will impact automobiles and parts, giving Japan an edge over other countries that have faced a hefty 25% tariff on auto exports since April.
Furthermore, Trump indicated that Japan would be investing a whopping $550 billion into the United States, remarking that the U.S. would earn 90% of the profits from this investment.
Earlier today, Trump took to Truth Social, briefing followers that “This deal will create hundreds of thousands of jobs. It’s unprecedented. Japan has agreed to open up their markets for trade on cars, trucks, rice, certain agricultural products, and more. They’ll pay the U.S. a 15% reciprocal tariff.”
In response to this news, Japanese markets surged, with automaker shares driving the Nikkei index up by 3.7%, marking a yearly high.
Japan’s chief negotiator, Ryosei Akazawa, celebrated the milestone by posting on X, declaring “Mission accomplished” along with a photo of himself in the White House pointed at images of Trump and Japan’s Prime Minister Shigeru Ishiba from earlier dialogues.
According to Akazawa, who spoke to reporters in Washington, Japan stands out as the first country to reduce tariffs on auto goods without volume restrictions.
In the run-up to the agreement, Prime Minister Ishiba praised the deal as the most favorable outcome for a nation having a trade surplus with the U.S. He noted that the government will meticulously assess the agreement details.
“We believe this will help generate jobs, create good products, and foster various global roles through U.S.-Japan cooperation,” he added during a press gathering on Wednesday.
Akazawa clarified that the $550 billion Japanese investment would primarily support businesses in vital sectors, such as pharmaceuticals and semiconductors.
In terms of agricultural trade, Akazawa pointed out that American rice imports might see an increase, although clarified that Japanese agriculture would not suffer due to the deal.
Additionally, Akazawa mentioned ongoing conversations regarding other tariffs not addressed in the current agreement, especially for steel and aluminum, which remain subject to a 50% tariff.
This new deal marks the third trade-related announcement Trump made on that Tuesday. It comes after drawn-out negotiations with major trading partners like the European Union, South Korea, India, and others, as the clock ticks down to Trump’s August 1 deadline for increased tariffs.
Tight Negotiations
The negotiations were described as challenging by both sides. In June, when asked about the prospect of brokering a trade agreement with Japan, Trump remarked, “They’re tough negotiators; the Japanese are tough.” However, he later indicated that the agreement represents an enfolding “exciting time for the United States and Maine, particularly highlighting the steady friendship with Japan.”
In remarks last month, Trump spotlighted rice exports as a thorny issue in the negotiations.
“They aren’t accepting our rice, even though they experience significant rice shortages,” Trump pointed out in a post on Truth Social.
According to trade data from the U.S. Census Bureau, Japan imported $298 million in rice from the U.S. last year; from January to April this year, purchases totaled $114 million.
However, a 2021 report from the U.S. Trade Representative indicated Japan’s highly regulated and opaque rice importation system hampers meaningful access for U.S. exporters.
Cars, crucial for Japan’s economy, have also posed problems in the discussions. Trump criticized Japan for not buying more American vehicles, stating, “We didn’t sell them any cars for the past 10 years.” Still, Japan imported 16,707 models of American cars last year, according to the Japan Automobile Importers Association.
Despite these challenges, signs of thawing tensions emerged last week when U.S. Treasury Secretary Scott Bessent and Ishiba conversed in Tokyo, with Bessent sharing his optimism for reaching an agreement in a post on X.
Bessent noted, “Securing a balanced deal is more beneficial than rushing into it, and a mutually advantageous trade agreement with Japan is still on the table.”
Economist Mary Lovely at the Peterson Institute observed that the pact alleviated the possibility of imposing even higher tariffs on Japan.
She expressed that the deal relieves Japan from looming 25% tariff threats and positions it competitively against similar U.S. suppliers while hinting that agricultural liberalization is a win for Japanese consumers, particularly affordable California rice.
Significant Trade Relationship
In contrast to some of Trump’s more recent agreements with countries like Indonesia and the Philippines, Japan is a pivotal trading partner for the U.S.
As the fifth-largest supplier to the U.S., Japan exported goods worth $148 billion to America last year, primarily automobiles, car components, agricultural, and construction machinery.
Prior to the new agreement-taking shape, Japanese goods faced temporary tariffs of 24% set to revert back to a 10% minimum rate post an April three-month delay.
Back in early July, motivations came forth from Trump in a letter to Prime Minister Ishiba, signaling threats of a 25% tariff coming Aug 1 if progress wasn’t made.
In turn, the U.S. sold $80 billion in products to Japan last year encompassing oil, gas, pharmaceuticals, and aerospace items.
Besides the trade collaboration, Trump revealed talks with lawmakers about an exciting gas pipeline effort in Alaska, stressing the desire to urge Asian allies, particularly Japan and South Korea, to insert funds into this Alaskan project.
“They’re all prepared to finalize that agreement soon,” Trump stated while withholding further specifics.
Japan has faced challenges in synchronizing optimal trading practices; notably because China asserts influence as its primary trading partner. Reports indicate the Trump administration has been urging allies to limit trade with China to finalize U.S. agreements.
This latest trade pact follows an enhanced agreement drafted in 2019 which initiated simplified duty-free pathways for more exports.
Japan commands a noteworthy position, holding $1.1 trillion worth of U.S. Treasuries as record creditors concerning the U.S. national debt.
This piece has been revised to include updated insights and developments.
Additional contributions to this report were made by CNN’s John Liu, Yumi Asada, and Matt Egan.
