Japan strikes trade deal with US, shares surge
By Abigail Townsend
Date: Wednesday 23 Jul 2025
(Sharecast News) - The US and Japan have struck a critical trade deal, cutting tariffs on imports and sending shares in Japanese automakers soaring.
Under the terms of the deal, tariffs on Japanese cars imported to the US will be cut to 15% from 25%. Levies on other goods, which were due to come into effect from 1 August, will be reduced by same amount.
In a social media post late on Tuesday, Donald Trump said: "We just completed a massive Deal with Japan, perhaps the largest Deal ever made."
The US president said that under the terms of the agreement, Japan will pay reciprocal tariffs of 15% and would invest "at my direction $550 Billion Dollars into the United States, which we will receive 90% of the Profits.
"Perhaps most importantly, Japan will open their Country to Trade including Car and Trucks, Rice and certain other Agricultural Products, and other things."
Japan's critical car sector is one of the country's most important, and around a quarter of all exports bound for the US market. America imported more than $55bn of vehicles and automotive parts from Japan in 2024, according to Reuters.
As at 0715 BST, Honda had surged 11% and Toyota Motor Corp 6%, while the benchmark Nikkei was up 4%.
Japan's under-pressure prime minister Shigeru Ishiba confirmed that tariff cut, noting: "This is the lowest figure to date among countries with trade surpluses in the US.
"This is precisely the result of my consistent advocacy and strong lobbying of the US since I proposed investment over tariffs to President trump at our White House summit in February."
Japan is the largest economy to strike a deal with Washington since Trump first unveiled his swingeing global tariff regime in April.
Stephen Innes, managing partner at SPI Asset Management, said: "Japan's trade surplus with the US is roughly 80% car and car parts, meaning this is just sector-specific relief, it's macro-relevant.
"A 15% tariff is still a tax, but it's a whole lot better than the economic wrecking ball that was hanging over Tokyo.
"The deal also hints at potential incentives for Japan to shift more production stateside, a clear play to Trump's reshoring agenda."
Min Joo Kang, senior economist, South Korea and Japan, at ING, said: "The deal largely aligns with our initial forecasts. It's expected that Japan will increase direct investment in the US, such as LNG projects in Alaska, and boost imports of US goods.
"But the implementation of a 15% tax on cars without a limit is a surprise. Ongoing uncertainty regarding Japanese politics - including reports Ishbia will step down soon - and the exclusion of defence spending from the agreement may introduce complexities to the negotiation process.
"The deal will put more pressure on other major Asian exporters to secure better deals."
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