President Donald Trump announced that the United States and Japan reached a major trade deal that is "perhaps the largest deal ever made.
Japan agreed to invest $550 billion in the U.S., which will tax Japanese goods sold to America at 15 percent—lower than the 25 percent tariff Trump had threatened.
Japan will also open its economy further to American cars, trucks, rice and agricultural products, Trump announced on Tuesday night.
Why It Matters
The agreement signaled a substantial shift in America's trade relationship with one of its most important Asian allies.
The trade pact not only averted a significant escalation of tariffs that risked destabilizing markets but also promised to generate investment and reshape sectors such as manufacturing and automotive, which remain vital to the U.S. economy.
The U.S. Census Bureau reported a $69.4 billion trade deficit with Japan in 2024, underlining the economic stakes for both countries.
What To Know
Trump's new framework levies a 15 percent tax on all goods imported from Japan, including automobiles and key industrial products, in contrast to the 25 percent tariff that had been on the table.
He wrote on Truth Social: "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. 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 percent.
"This is 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. Thank you for your attention to this matter!"
The new, lower tariff rate comes after earlier U.S. proposals led to market turbulence in April. U.S. automakers and other industry groups voiced concerns about the impact of such tariffs.
Japan also agreed to drop extra safety tests for imported U.S. cars and to expand the share of U.S. rice it imports.
However, the agreement does not include reciprocal tariff reductions by Japan on American goods, and details remain unclear concerning the tariff status of some specific sectors, such as steel and aluminum exports from Japan.
Who People Are Saying
Japanese Prime Minister Shigeru Ishiba: (15 percent is) "the lowest rate ever applied among countries that have a trade surplus with the U.S."
Matt Blunt, president of the American Automotive Policy Council: "Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American-built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers."
Shigeto Nagai, head of Japan Economics at Oxford Economics: (The deal) "will be a huge boost to restore the U.S., fitting in with Trump's story of reviving U.S. manufacturing with more jobs."
What Happens Next
The new tariff rates are scheduled to take effect on August 1, per Trump's earlier letter to Japanese authorities.
The administration is continuing negotiation efforts with other global trading partners, including the European Union, which faces a threatened 30 percent tariff if no agreement is reached. The U.S. also maintains ongoing deliberations with China, with tariffs and trade deficits expected to remain focal points in future talks.
Newsweek