Trump Declares "Massive" Trade Deal with Japan, Raising Hopes and Questions

 

US President Donald Trump speaks during a news conference with Japanese Prime Minister Shigeru Ishiba at the White House, in Washington, DC, on February 7, 2025 [Evan Vucci/AP]

Trump Declares "Massive" Trade Deal with Japan, Raising Hopes and Questions

Washington, D.C. – July 23, 2025 – United States President Donald Trump announced on Tuesday that he has sealed a "massive" trade deal with Japan, ending months of tense negotiations and averting the specter of even higher tariffs.¹ The agreement, which Trump hailed as potentially the "largest Deal ever made," includes a 15 percent US tariff on Japanese exports and a colossal $550 billion Japanese investment into the United States.²

Key Provisions and Trump's Vision

Taking to his Truth Social platform, President Trump declared, "Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits.³ This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it.” He further stated that Japan would open its markets to US exports, including cars, rice, and certain agricultural products, predicting the creation of "hundreds of thousands of jobs."⁴

Later on Tuesday, at a reception with members of the US Congress, Trump added that the two nations had also agreed to form a joint venture to exploit liquified natural gas in Alaska.⁵ "It's a great deal for everybody. I always say it has to be great for everybody," he emphasized. US Secretary of the Treasury Scott Bessent echoed this sentiment on X, calling it a "historic agreement" and reaffirming commitment to the alliance, heralding a "new Golden Age under President Trump."

Japan's Measured Response and Tariff Reductions

Japanese Prime Minister Shigeru Ishiba, whose ruling coalition recently suffered the loss of its upper house majority in a weekend election, responded more cautiously on Wednesday.⁶ He told reporters he would "carefully examine" the details but believed the deal was in the national interest. Confirming local media reports, Ishiba stated that US tariffs on Japanese automobiles would be lowered from 25 percent to 15 percent.

Trump’s earlier auto tariffs and 50 percent duties on aluminum and steel had been major sticking points in the prolonged negotiations. However, Japan’s trade envoy Ryosei Akazawa clarified that the aluminum and steel tariffs were not covered in the new deal and would remain in place.⁷ Japan had faced a looming August 1 deadline, after which a 25 percent duty on most exports was threatened if no agreement was reached.⁸ William Chou, deputy director of the Japan Chair at the Hudson Institute, remarked that the 15 percent tariff rate was "relatively good news" for Japan given the prior threats.⁹

Market Reaction and Economic Impact

Following Trump’s announcement, Japanese auto stocks experienced a significant surge. Mazda soared over 17 percent, while Toyota, Nissan, and Honda saw gains of between 8.5 and 12 percent on Wednesday morning.¹⁰ Japan’s benchmark Nikkei 225, tracking the broader stock market, rose nearly 3 percent.¹¹

Min Joo Kang, senior economist for South Korea and Japan at ING, noted that while specifics remain unclear, "both parties called the pact deal a success."¹² She observed that "Trump appears to view it as a massive deal, while Ishiba characterised it in less grandiose terms," highlighting Ishiba's point that Japan had negotiated the lowest tariff rate among countries with a trade surplus with the United States.¹³

This agreement, though sparse on immediate public detail, stands as potentially the most significant of Trump's trade deals unveiled so far, following preliminary agreements with the United Kingdom, Indonesia, Vietnam, and the Philippines, and a temporary trade truce with China.¹⁴

Japan, the world’s fourth-largest economy, is the US’s fifth-largest trading partner.¹⁵ In 2024, the US imported $148.2 billion worth of Japanese goods, while Japan purchased $79.7 billion worth of US products, according to the US Census Bureau.¹⁶

Brian Jacobsen, chief economist at Annex Wealth Management, reflected on the market's reaction, stating, "It’s a sign of the times that markets would cheer 15 percent tariffs.¹⁷ A year ago, that level of tariffs would be shocking. Today, we breathe a sigh of relief."

The deal represents a significant moment in US-Japan economic relations, with both immediate market boosts and long-term implications that will unfold as further details emerge.