[Breaking] Historic Japan-US Trade Agreement Reached | Reciprocal Tariff Set at 15%, Auto Tariff Also Halved

Key Points Summary

• Japan and the United States announced a broad agreement in trade negotiations
• Reciprocal tariffs to be reduced from 25% to 15%
• Automobiles, Japan’s key industry, will face a 12.5% additional tariff, totaling 15% including the existing 2.5%
• Agreement reached to expand market access for rice and other agricultural products
• 50% tariffs on steel and aluminum remain unchanged
• Japan to invest $550 billion (approx. 80 trillion yen) in the U.S., potentially creating hundreds of thousands of jobs

Background: Negotiations Under Trade Pressure

On July 22, 2025 (U.S. time), President Donald Trump announced via his SNS “Truth Social” that an agreement had been reached in trade negotiations with Japan. This deal includes a reduction of the previously notified 25% reciprocal tariff to 15%, aimed at easing rising trade tensions. In his statement, Trump noted that “Japan opening its market to trade, including rice, trucks, and automobiles, is the core of this agreement.”

Automobile Industry: Japan's Economic Lifeline Considered

The automobile sector accounts for over 25% of Japan’s exports to the United States. The agreement reduces the proposed 25% additional U.S. tariff on Japanese cars to 12.5%, which, when added to the existing 2.5% base tariff, results in an effective 15% rate. This compromise limits the impact on major Japanese automakers like Toyota, Honda, and Nissan, allowing for a more stable export environment. In the U.S., attention is focused on how this may affect competitiveness due to rising import car prices.

Image source: NHK News

Agriculture and Food Security: Rice Market Adjustment and Access Expansion

In the field of agriculture, Japan agreed to increase imports of U.S.-produced rice within the existing minimum access quota. This is expected to provide U.S. farmers with greater access to the Japanese market and increase consumer choices in Japan. Additionally, tariffs and barriers on trucks and agricultural products will be eased, laying the foundation for new frameworks in Japan-U.S. agricultural cooperation, according to the agreement on improving market access.

Steel and Aluminum: Background and Challenges of Tariff Maintenance

Meanwhile, due to national security concerns, 50% tariffs on steel and aluminum remain in place. These high tariffs were originally introduced to protect domestic jobs and industries in the U.S., and there was limited room for adjustment in this round of talks. Future discussions are expected to continue on these sectors, with input from both Japanese and American industries.

Japanese Investment and American Job Creation

President Trump also announced that Japan would make foreign direct investments worth $550 billion (approx. 80 trillion yen) in the United States. The investments are expected to cover infrastructure, renewable energy, and semiconductor manufacturing. Trump emphasized, “This agreement will create hundreds of thousands of jobs,” and called it “the largest deal in history, with the U.S. gaining 90% of the benefits.”

Conclusion and Outlook: Stability and Challenges in Japan-U.S. Relations

This Japan-U.S. agreement aims to avoid trade friction and bring greater stability to both countries’ industries. For Japan, it reflects an effort to protect its key sectors—automobiles and agriculture—while maintaining a trust-based relationship with the U.S. However, from the perspective of trade policy, unresolved issues remain regarding steel, aluminum, and IT-related goods. Continuous dialogue and cooperation between the two nations will be essential. This agreement marks a new chapter in Japan-U.S. relations, with potential implications for the global economy.

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