U.S., Japan agree on 15% reciprocal tariffs

July 23,2025(MLN): U.S. President Donald Trump unveiled what he described as a “massive” trade deal with Japan, setting “reciprocal” tariffs of 15% on Japanese exports to the U.S., including a significant cut in auto duties.

The announcement, made via a Truth Social post, included claims that Japan would invest $550 billion in the U.S., with America receiving “90% of the Profits.”

Trump said the agreement would open Japan’s market to U.S. exports of cars, trucks, rice, agricultural products, and other goods, creating “Hundreds of Thousands of Jobs.”

Japanese Prime Minister Shigeru Ishiba confirmed that auto tariffs would be lowered from the previous 25% rate to 15%, a key change for Japan, where auto exports make up 28.3% of all shipments.

In June, Japanese auto exports to the U.S. dropped 26.7%, following a 24.7% fall in May.

Overall exports to the U.S. from January to June totaled 10.3 trillion yen ($70.34bn), marking a 0.8% year-on-year decline.

Annex Wealth Management’s Chief Economist Brian Jacobsen said, “A year ago, that level of tariffs [15%] would be shocking. Today, we breathe a sigh of relief,” as reported by CNBC.

Japan’s chief trade negotiator Ryosei Akazawa responded to the news with a post on X stating “Mission Accomplished” and offering thanks to those involved.

In a speech following his social media announcement, Trump mentioned a separate liquified natural gas deal with Japan and hinted at an upcoming agreement with Europe, though no specifics were given.

The deal comes at a politically sensitive time for Prime Minister Ishiba, whose coalition recently lost its upper house majority.

While Ishiba had initially stated plans to remain in office, reports from Japan’s Mainichi Newspaper indicated he may announce his resignation by August.

Yomiuri reported that Ishiba was waiting to assess progress on tariff negotiations before making a final decision.

HSBC noted that a favorable deal with the U.S. could help Ishiba avoid a no-confidence motion or internal party challenge from the Liberal Democratic Party (LDP).

Markets responded positively to the trade breakthrough. Japan’s Nikkei 225 rose over 2%, while major automakers posted sharp gains: Mazda surged 17%, Mitsubishi Motors 13%, Toyota 11%, Honda over 8%, and Nissan more than 8%.

Earlier this month, Trump had warned of 25% tariffs on Japanese exports starting August 1, slightly higher than the 24% rate from his April 2 “Liberation Day” tariffs.

WisdomTree’s global CIO Jeremy Schwartz told CNBC’s “Squawk Box Asia” that the sharp market reaction reflected overly pessimistic expectations.

He added that Trump’s trade deals aim not only to balance the trade deficit but also to attract strategic investments in the U.S., citing a planned $500bn investment in AI infrastructure by Softbank, OpenAI, and Oracle over the next four years.

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