On July 22, President Trump announced that the U.S. had struck a trade agreement with Japan. The announcement calls for a 15% tariff on Japanese goods imported into the U.S. In return, Japan will “open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things.”
Under President Trump’s reciprocal tariff package announced in April, Japanese goods would be subject to a 24% duty. The imposition of this tariff was postponed, though a 10% universal tariff applies in the interim. On July 7, President Trump warned that a 25% tariff on Japanese goods would be effective from August 1.
While the announcement fixes the general tariff on Japanese imports into the U.S. at 15%, other details remain uncertain. Importantly, while the announcement touts that “Japan will open their Country to Trade,” it does not specify whether U.S. goods will be subject to a tariff and, if so, at what rate. Also, given the volume of trade in automotive and other industrial products between the two countries, the stacking mechanism between this general 15% tariff and recently enacted U.S. duties on steel, aluminum and auto and auto parts imports — as well as pending likely tariffs resulting from various Section 232 investigations, such as pharmaceuticals, semiconductors — will also be critical. A deal board photographed by White House social media refers to a “10 percent tariff” and “15 percent across autos, pharma, semis.” These and other details will hopefully come into focus as the partners work toward a framework agreement.
Additionally, Japan will commit to a $550 billion investment in U.S. products, of which the U.S. “will receive 90% of the Profits.” According to a fact sheet published by the White House after the announcement, these investments will be targeted toward the revitalization of America’s strategic industrial base, including: energy infrastructure and production, including LNG, advanced fuels, and grid modernization; semiconductor manufacturing and research; critical minerals mining, processing, and refining; pharmaceutical and medical production; commercial and defense shipbuilding, including new yards and modernization of existing facilities. According to a recent Congressional Research Service report, “Japan is the sixth-largest U.S. trade partner, a top source of foreign direct investment (FDI) in the United States, and largest holder of U.S. Treasury securities.” Since 2020, trade between the nations has been governed by a pair of agreements: the U.S.-Japan Trade Agreement, which reduced or eliminated tariffs on various industrial and agricultural goods; and the U.S.-Japan Digital Trade Agreement.
