TOKYO/WASHINGTON – Japan and the United States have struck what President Donald Trump called a “historic” trade deal that will set tariffs on Japanese cars and other products at 15 percent — lower than initially threatened — and boost Japanese investment in the world’s biggest economy.
The deal, first announced by Trump on social media Tuesday, capped off rounds of bilateral negotiations since mid-April, during which export-reliant Japan aimed for a win-win agreement ahead of an Aug. 1 deadline for Washington to impose a “reciprocal” 25 percent tariff on Japanese goods.
“We have engaged in negotiations to protect what must be protected and reach a deal that suits the national interests of both nations,” Japanese Prime Minister Shigeru Ishiba told reporters Wednesday. “We obtained the largest reduction among countries that have trade surpluses with the United States. This is a great achievement.”
Ishiba said Japan will increase the portion of rice imports from the United States within its “minimum access” tariff-free quota of around 770,000 tons a year, a framework consistent with World Trade Organization rules.
He stressed, however, that the agreement does not include any reduction of Japanese tariffs, including those on farm products, and that no concessions were made that would undermine Japan’s agriculture sector.
Trump said on his Truth Social platform Tuesday night that Japan will invest, “at my direction,” $550 billion in the United States, which will receive 90 percent of the profits. He praised the deal, saying it will create hundreds of thousands of jobs.
“This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan,” Trump wrote.
The Trump administration’s 25 percent additional auto tariff had been one of the biggest sticking points in the trade negotiations. Trump has claimed that Japan does not import enough U.S. cars when compared with the number of Japanese vehicles entering his country.
Combined with the 2.5 percent rate already in place, the administration imposed a total tariff of 27.5 percent on foreign-made passenger vehicles in April, citing national security grounds.
Partially easing concerns among automakers like Toyota Motor Corp., the United States agreed to halve the 25 percent additional auto tariff to 12.5 percent while keeping the 2.5 percent levy.
Japan secured a reduction in U.S. tariffs on Japanese automobiles and auto parts without any volume restrictions, according to Ishiba.
Still, the government is considering asking Japanese automakers to import vehicles they manufactured in the United States into Japan, a source familiar with the matter said.
The process would statistically bolster auto exports from the United States to Japan, potentially helping reduce the massive U.S. trade deficit that Trump sees as problematic.
Automobiles accounted for around a quarter of Japan’s exports to the United States in 2024 in value terms, according to Japanese government data.
Japanese officials said the 50 percent tariffs imposed by the United States on steel and aluminum imports remain in place, but added the impact on the country’s private sector would be minimal.
The deal was announced after Japan’s top tariff negotiator, Ryosei Akazawa, held a 70-minute meeting with Trump at the White House on Tuesday. Akazawa arrived in Washington on Monday for his eighth round of in-person negotiations with U.S. Cabinet members.
No date has been set for the new agreement to take effect, but the officials said Japan will aim to implement it as soon as possible and ask the United States not to impose the 25 percent country-specific tariff on Japan, even temporarily.
Trump later said at a White House event that he had ‘just signed the largest trade deal in history’ with Japan, adding the two countries will form a joint venture for liquefied natural gas in Alaska.
But one of the officials said Japan and the United States have yet to sign the deal or agree to establish such a joint venture.
Ishiba said Japan will invest $550 billion in the United States through Japanese companies, targeting sectors such as pharmaceuticals and semiconductors, in hopes of strengthening economic security. Government-affiliated banks will also provide funding.
The plan is dubbed the “Japan invest America initiative,” according to Akazawa, who told reporters that his team had focused on “investment rather than tariffs” throughout the negotiations.
The deal triggered a surge in Japanese shares, though the lower tariff rates will still be negative for the world’s fourth-largest economy.
The 15 percent tariff would push down Japan’s real gross domestic product by 0.5 percentage point in 2025, according to an estimate by the Daiwa Institute of Research. The negative impact would be even greater, at 1.1 percent, when taking into account the effects of Trump’s tariff policy and the resulting blow to Japan’s major trading partner, China.
For Ishiba, who is fending off pressure to resign following a parliamentary election that dealt a severe blow to his ruling coalition, the latest agreement could be a mixed blessing.
He has consistently said Japan would not rush to reach a deal at the expense of its national interests, meaning the auto sector, the backbone of the Japanese economy, and agriculture should be protected.
Japan had sought to persuade Trump to remove the tariffs by emphasizing that the Asian nation is a big contributor to the United States in terms of job creation and investment.
But the United States apparently did not budge, forcing Japan to rethink its strategy and settle for lower tariff rates.
Trump has turned to tariffs to rectify trade imbalances. Cars were symbolic due to the significant impact they have on both economies.
In the weeks leading up to the agreement, Trump indicated that striking a deal with Japan before Aug. 1 would be difficult. He intensified pressure by repeating his frequent accusation that the key U.S. ally had been reluctant to import American cars and agricultural products.
Akazawa said the deal contains no provisions related to increasing Japan’s defense spending.
Trump announced sweeping “Liberation Day” tariffs on April 2, targeting dozens of countries with which the United States runs trade deficits, before pausing them for 90 days to provide time for talks.
He later extended the pause to Aug. 1 amid little progress in its talks with major trading partners, also including South Korea and the European Union.
Japan’s deal is the fifth since the start of Trump’s aggressive tariff campaign during his second term, following those reached with Britain, Vietnam, Indonesia and the Philippines. The one with Manila was also announced by the U.S. president on Tuesday.