Announced on Tuesday, 22 July, the US and Japan agreed on a trade deal to a reciprocal 15% tariff on imports.
In what US President Donald Trump has described as “perhaps the largest Deal ever made”, this marks a deescalation from the previously agreed 25% rate – but higher than the 10% rate which was in place while negotiations were ongoing.
Japan currently faces a 25% additional tariff on vehicles and auto parts. The new deal will lower tariffs on Japanese auto exports to 15%. This development is significant: automobile exports composed 28.3% of all Japanese exports to the US in 2024, but this figure has fallen steeply month-on-month in 2025.
In response to yesterday’s news, stocks of Japanese automobile manufacturers have jumped, indicating market confidence. Toyota stock jumped more than 15%, Honda jumped over 11%, and Mazda Motor surged over 17%, with considerabe increases for Nissan and Mistubishi Motors too.
Additionally, in agriculture sources have said that Japan will increase its ratio of rice imports from the US. Under its ‘minimum access’ system, Japan imports a mandatory amount of tariff-free rice annually – around 770,000 tons.
However, today, NHK reported that the US intends to keep the current 50% steel and aluminium tariffs.
Negotiations have been strained between Japanese Prime Minister Shigery Ishiba and Trump. As recently as 2 July, Trump threatened to take tariffs to Japanese goods to 35%; this breakthrough comes as a surprise for many.
Ishiba has been under pressure to step down as prime minister since his party, the centre-right Liberal Democratic Party (LDP), suffered a historic defeat in a Sunday election. This is the first time the LDP has found itself a minority in both houses of parliament since the party’s founding in 1955. Inflation was a key frustration for voters this weekend.
Japan is has been undergoing economic stress, with inflation and interest rates creeping upwards. The Bank of Japan (BOJ) has stated that this tariff agreement should contribute towards their target of 2% inflation, which, despite a decade-long stimulus program, have remained stubbornly high particularly in food and property prices.
The renegotiation of these tariffs could help Ishiba’s prospects and contribute to political stability in Japan more generally.
