Japan Secures Trade Deal with US

Japan reached a long-awaited trade deal with the US this week, which would lower tariffs on US imports of Japanese autos and prevent new levies, in return for $550 billion in Japanese investment and loans to the US, Reuters reported. 

Duties scheduled to start on Japanese goods from Aug. 1 will be lowered from 25 percent to 15 percent. 

Japan’s auto sector, which makes up over a quarter of its exports to the US, will see a tariff reduction from the previous 27.5 percent to 15 percent, which will put Japan at an advantage over other major vehicle exporters who were hit with 25 percent levies in April, CNN noted.  

Part of the deal also consists of Japan purchasing and increasing its annual defense spending with US firms from $14 billion to $17 billion, according to a White House official. 

Japanese negotiators said that Japan’s $550 billion contribution to the US would come through equity and loans to support Japanese businesses’ investments in critical sectors, such as pharmaceuticals and semiconductors. 

Japan is also expected to purchase $8 billion worth of agricultural and other goods, increasing its rice imports by 75 percent. However, Japanese Prime Minister Shigeru Ishiba said the agreement does “not sacrifice” Japanese agriculture. 

The deal does not cover Japanese exports of steel and aluminum, currently under 50 percent duties. 

Ishiba, who on Wednesday denied rumors that he had decided to step down following his party’s recent defeat in legislative elections, welcomed the agreement as “the lowest rate ever applied among countries that have a trade surplus with the US.” 

Japan is the fifth-largest US trading partner in terms of volume of goods and ran a trade surplus of nearly $70 billion with the US in 2024. 

Analysts said the deal between the two allies seemed out of reach just a few weeks ago, and it is the most significant among several deals US President Donald Trump has secured since announcing sweeping global tariffs in April. 

The US is hurrying to close trade deals with many of its trade partners ahead of the Aug. 1 deadline Trump has repeatedly postponed due to pressure from markets and intense lobbying by industry. 

Japan is now the latest country to make a trade agreement with the Trump administration in recent months, following the United Kingdom, Vietnam, and a preliminary agreement with China. 

The US also reached similar deals this week with Indonesia and the Philippines, with their tariffs lowered to 19 percent.