U.S. President Donald Trump signed an executive order implementing a trade deal with Japan, which includes a 15% baseline tariff on most Japanese goods, such as autos. The agreement, finalised in July after several months of negotiations, includes Tokyo investing $550 billion in projects chosen by the U.S., boosting imports of American agricultural goods such as corn and soybeans, and acquiring U.S.-manufactured aircraft and defence systems.
Japan will also receive market access in sectors such as manufacturing, aerospace, agriculture, and automobiles. The previous agreement involved Japan buying 100 Boeing aircraft, increasing U.S. rice imports by 75%, and $8 billion in agricultural exports. The updated order establishes 15% tariffs on most Japanese imports, with additional sector-specific levies on autos, aerospace, pharmaceuticals, and natural resources.
The tariffs on Japanese goods will be retroactive to imports after August 7, 2025, with automobile tariffs taking effect after seven days. This step aims to prevent the imposition of additional country-specific tariffs beyond the current levies. Trump’s global tariff policy has disrupted supply chains, notably impacting Japan’s auto industry. Toyota warned of a $10 billion loss from tariffs, prompting a 16% profit forecast cut. Ford and GM also expect significant profit reductions, with Ford’s profits expected to drop by $3 billion and GM’s by up to $5 billion.
Japan’s principal trade negotiator, Ryosei Akazawa, who was present in Washington, reportedly submitted a letter from Prime Minister Shigeru Ishiba inviting President Trump to visit Japan. Ishiba had earlier cancelled a U.S. trip because of unresolved technical problems.
Politically, the deal coincides with mounting pressure on Ishiba at home. Japan’s ruling Liberal Democratic Party (LDP) recently issued a report blaming its July election setbacks on weak economic measures, scandals, and low youth voter turnout. Many party members are considering resignation, and Ishiba’s leadership is under scrutiny. Analysts predict his loss in an upcoming leadership election, with a 60% chance that he could resign beforehand amid internal discontent.
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Overall, the trade agreement reflects ongoing U.S.-Japan negotiations amidst internal Japanese political challenges and the broader impact of U.S. tariffs on global industries.
