On Tuesday night in Washington, US President Donald Trump announced what he described as a breakthrough trade agreement with Japan, following months of stalled negotiations and tariff threats.
“We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it,” Trump posted on Truth Social.
Later that evening, at a reception with Republican lawmakers at the White House, he repeated the scale of the agreement.
“I just signed the largest trade deal in history; I think maybe the largest deal in history with Japan. They had their top people here, and we worked on it long and hard. And it's a great deal for everybody,” he said.
What the deal includes
According to CNN, the agreement introduces a 15% reciprocal tariff on Japanese goods entering the US. Japan, in turn, will open its markets to key American exports such as cars, trucks, rice, and agricultural products.
“Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%,” Trump said in another Truth Social post.
He did not specify how the $550 billion investment would be structured, nor how profits would be calculated. No official documentation outlining the deal has yet been released by either side.
Trump closed his remarks by calling the moment “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.”
Rice and Cars: Key points of disagreement
Trade in rice was one of the more contentious topics in negotiations. Just weeks ago, Trump had written, “They won’t take our RICE, and yet they have a massive rice shortage,” again on Truth Social.
Japan imported $298 million worth of US rice last year, and $114 million between January and April of this year, according to CNN. But American exporters have long complained about the difficulty of entering Japan’s market. A 2021 report by the Office of the United States Trade Representative under then-President Joe Biden stated, “Japan’s highly regulated and non-transparent system of importation and distribution for rice limits the ability of US exporters to have meaningful access to Japan’s consumers.”
Cars were another sticking point. Earlier this month, Trump remarked, “We didn’t give them one car in 10 years.” However, data from the Japan Automobile Importers Association shows Japan imported 16,707 American-made vehicles in 2024.
Defence spending not in US-Japan deal
The new US-Japan trade deal does not cover spending on defence, Tokyo's tariffs envoy said Wednesday.
"The deal does not include anything on defence spending," Ryosei Akazawa told reporters.
President Donald Trump has called on the close US ally to hike military spending, and there was speculation that this could be part of a wider trade accord.
Tensions before the deal
Both sides had signalled frustration with the drawn-out process. In June, when asked about a deal's prospects, Trump told reporters aboard Air Force One, “They’re tough. The Japanese are tough.”
In early July, Trump sent a formal letter to Prime Minister Shigeru Ishiba threatening a 30% tariff on Japanese goods if no deal was reached by 1 August. That followed a 24% reciprocal tariff placed earlier this year, which had been paused for 90 days from April amid global market unrest.
The clock ticking towards August gave talks a renewed urgency. The Japan agreement was one of three trade announcements Trump made on Tuesday, alongside pending deals with the European Union and others.
Japan’s PM confirms 15% auto tariff cut
Japanese Prime Minister Shigeru Ishiba confirms US tariff on autos cut to 15%.
Japan’s chief trade negotiator, Ryosei Akazawa, posted on Facebook that he had visited the White House with the caption “Mission accomplished.”
Back home, Ishiba faces political pressure after his Liberal Democratic Party lost its majority in Japan’s upper house over the weekend. The party had already lost control of the more powerful lower house last year, leaving Ishiba’s leadership on unstable ground.
Market reactions and expert views
Japan’s benchmark Nikkei 225 rose by 2% on Wednesday morning, buoyed by investor optimism. Shares in Toyota, Nissan, and Honda climbed after Japanese broadcaster NHK reported that tariffs on Japanese carmakers might be reduced.
Treasury Secretary Scott Bessent, who met with Ishiba in Tokyo days before the announcement, struck an optimistic tone.
“A good deal is more important than a rushed deal, and a mutually beneficial trade agreement between the United States and Japan remains within the realm of possibility,” Bessent posted on X.
Mary Lovely, a trade expert at the Peterson Institute, told CNN, “The ‘deal’ relieves Japan of the 25% tariff threat and puts it potentially in a competitive position vis a vis similar US suppliers. The US is unlikely to sell many cars and trucks… from the US. Agricultural liberalisation (is) a win for Japanese consumers, assuming they are willing to try excellent California rice.”
Japan remains one of the US’s most important trading partners. It was the fifth-largest source of imports in 2024, shipping $148 billion worth of goods to the US. These included cars, auto parts, and industrial machinery.
Meanwhile, the US exported $80 billion worth of goods to Japan, including oil, pharmaceuticals, and aerospace technology.
Japan is also the largest foreign holder of US debt, owning $1.1 trillion in Treasury securities. That gives Tokyo some leverage in negotiations, though it is also balancing trade ties with China, its biggest trading partner.
The new deal follows a 2019 expanded trade pact between the two countries, which came into effect in 2020 and allowed more goods to move duty-free. Tuesday’s announcement suggests a shift toward more aggressive tariff-based policy under Trump, who continues to press allies to reduce trade with China.
With the August 1 deadline looming, attention now turns to the full release of terms and how Japan will formally respond. The White House has yet to issue an official fact sheet.
“We just completed a massive Deal with Japan, perhaps the largest Deal ever made. Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits. This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it,” Trump posted on Truth Social.
Later that evening, at a reception with Republican lawmakers at the White House, he repeated the scale of the agreement.
“I just signed the largest trade deal in history; I think maybe the largest deal in history with Japan. They had their top people here, and we worked on it long and hard. And it's a great deal for everybody,” he said.
What the deal includes
According to CNN, the agreement introduces a 15% reciprocal tariff on Japanese goods entering the US. Japan, in turn, will open its markets to key American exports such as cars, trucks, rice, and agricultural products.
“Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%,” Trump said in another Truth Social post.
He did not specify how the $550 billion investment would be structured, nor how profits would be calculated. No official documentation outlining the deal has yet been released by either side.
Trump closed his remarks by calling the moment “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.”
Rice and Cars: Key points of disagreement
Trade in rice was one of the more contentious topics in negotiations. Just weeks ago, Trump had written, “They won’t take our RICE, and yet they have a massive rice shortage,” again on Truth Social.
Japan imported $298 million worth of US rice last year, and $114 million between January and April of this year, according to CNN. But American exporters have long complained about the difficulty of entering Japan’s market. A 2021 report by the Office of the United States Trade Representative under then-President Joe Biden stated, “Japan’s highly regulated and non-transparent system of importation and distribution for rice limits the ability of US exporters to have meaningful access to Japan’s consumers.”
Cars were another sticking point. Earlier this month, Trump remarked, “We didn’t give them one car in 10 years.” However, data from the Japan Automobile Importers Association shows Japan imported 16,707 American-made vehicles in 2024.
Defence spending not in US-Japan deal
The new US-Japan trade deal does not cover spending on defence, Tokyo's tariffs envoy said Wednesday.
"The deal does not include anything on defence spending," Ryosei Akazawa told reporters.
President Donald Trump has called on the close US ally to hike military spending, and there was speculation that this could be part of a wider trade accord.
Tensions before the deal
Both sides had signalled frustration with the drawn-out process. In June, when asked about a deal's prospects, Trump told reporters aboard Air Force One, “They’re tough. The Japanese are tough.”
In early July, Trump sent a formal letter to Prime Minister Shigeru Ishiba threatening a 30% tariff on Japanese goods if no deal was reached by 1 August. That followed a 24% reciprocal tariff placed earlier this year, which had been paused for 90 days from April amid global market unrest.
The clock ticking towards August gave talks a renewed urgency. The Japan agreement was one of three trade announcements Trump made on Tuesday, alongside pending deals with the European Union and others.
Japan’s PM confirms 15% auto tariff cut
Japanese Prime Minister Shigeru Ishiba confirms US tariff on autos cut to 15%.
Japan’s chief trade negotiator, Ryosei Akazawa, posted on Facebook that he had visited the White House with the caption “Mission accomplished.”
Back home, Ishiba faces political pressure after his Liberal Democratic Party lost its majority in Japan’s upper house over the weekend. The party had already lost control of the more powerful lower house last year, leaving Ishiba’s leadership on unstable ground.
Market reactions and expert views
Japan’s benchmark Nikkei 225 rose by 2% on Wednesday morning, buoyed by investor optimism. Shares in Toyota, Nissan, and Honda climbed after Japanese broadcaster NHK reported that tariffs on Japanese carmakers might be reduced.
Treasury Secretary Scott Bessent, who met with Ishiba in Tokyo days before the announcement, struck an optimistic tone.
“A good deal is more important than a rushed deal, and a mutually beneficial trade agreement between the United States and Japan remains within the realm of possibility,” Bessent posted on X.
Mary Lovely, a trade expert at the Peterson Institute, told CNN, “The ‘deal’ relieves Japan of the 25% tariff threat and puts it potentially in a competitive position vis a vis similar US suppliers. The US is unlikely to sell many cars and trucks… from the US. Agricultural liberalisation (is) a win for Japanese consumers, assuming they are willing to try excellent California rice.”
Japan remains one of the US’s most important trading partners. It was the fifth-largest source of imports in 2024, shipping $148 billion worth of goods to the US. These included cars, auto parts, and industrial machinery.
Meanwhile, the US exported $80 billion worth of goods to Japan, including oil, pharmaceuticals, and aerospace technology.
Japan is also the largest foreign holder of US debt, owning $1.1 trillion in Treasury securities. That gives Tokyo some leverage in negotiations, though it is also balancing trade ties with China, its biggest trading partner.
The new deal follows a 2019 expanded trade pact between the two countries, which came into effect in 2020 and allowed more goods to move duty-free. Tuesday’s announcement suggests a shift toward more aggressive tariff-based policy under Trump, who continues to press allies to reduce trade with China.
With the August 1 deadline looming, attention now turns to the full release of terms and how Japan will formally respond. The White House has yet to issue an official fact sheet.
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