US President Donald Trump struck a trade deal with Japan that lowers tariffs on auto imports and spares Tokyo from punishing new levies on other goods in exchange for a $550bn (R9.6-trillion) package of US-bound investment and loans.
It is the most significant of a clutch of agreements Trump has bagged since unveiling sweeping global levies in April, though like other deals, exact details remained unclear.
Japan's autos sector, which accounts for more than a quarter of its US exports, will see existing tariffs cut to 15% from levies totalling 27.5% before. Duties due to come into effect on other Japanese goods from August 1 will also be cut to 15%.
The announcement sent Japan's benchmark Nikkei stock index climbing almost 4% to its highest in a year, led by stocks in automakers with Toyota up more than 14% and Honda nearly 11%.
"I signed the largest trade deal in history with Japan," Trump said on his Truth Social platform. "This is a very exciting time for the US, and specially for the fact that we will continue to have a great relationship with Japan."
Japanese Prime Minister Shigeru Ishiba, who plans to resign after a bruising election defeat on Sunday, according to a source close to the embattled premier, hailed the tariff agreement as "the lowest rate ever applied among countries that have a trade surplus with the US".
The 68-year old leader later said reports that he had decided to resign were "completely unfounded".
Two-way trade between the two countries reached nearly $230bn (R4-trillion) in 2024, with Japan running a trade surplus of nearly $70bn (R1.2-trillion). Japan is the fifth-largest US trading partner in goods, US census bureau data show.
The US investment package includes loans and guarantees from Japanese government-affiliated institutions of up to $550bn to enable Japanese firms "to build resilient supply chains in key sectors such as pharmaceuticals and semiconductors", Ishiba said.
Japan will also increase purchases of agricultural products such as US rice, a Trump administration official said. Ishiba said the share of US rice imports may increase under its existing framework but the agreement did "not sacrifice" Japanese agriculture.
Bank of Japan deputy governor Shinichi Uchida called the deal "very big progress" and said it reduces uncertainty over the economic outlook.
Some economists had forecast the tariffs could have tipped Japan, the world's fourth largest economy, into recession.
The exuberance in financial markets spread to shares of South Korean carmakers as the Japan deal stoked optimism the country could strike a comparable deal. The yen firmed slightly against the dollar, while European auto shares and US equity index futures rose.
However, US automakers signaled their unhappiness with the deal, raising concerns about a trade regime that cuts tariffs on auto imports from Japan while leaving tariffs on imports from their plants and suppliers in Canada and Mexico at 25%.
"Any deal that charges a lower tariff for Japanese imports with virtually no US content than the tariff imposed on North American-built vehicles with high US content is a bad deal for US industry and auto workers," said Matt Blunt, who heads the American Automotive Policy Council which represents General Motors Ford and Chrysler parent Stellantis .
Autos are a huge part of US-Japan trade, but almost all of it is one-way to the US. from Japan, a fact that has long irked Trump. In 2024, the US imported more than $55bn of vehicles and automotive parts while just over $2bn were sold into the Japanese market from the US.
Japanese finance minister Katsunobu Kato told reporters the agreement made no mention of foreign exchange rates, another issue the Trump administration had long complained about.
Trump's announcement came after a meeting with Japan's top tariff negotiator, Ryosei Akazawa, at the White House on Tuesday.
"#Mission Complete," Akazawa wrote on X, later saying the deal did not include Japanese exports of steel and aluminum that are subject to a 50% tariff and an agreement on defence budgets.
Japan will also drop additional safety tests imposed on imported US cars and trucks, requirements Trump and other US officials have said limit the volume of American-built vehicles sold in the country.
A photo of Akazawa's meeting with Trump at the White House indicated the two sides engaged in last-minute negotiations over the investment package to seal the deal.
The photo posted on X by Trump's assistant Dan Scavino showed the president seated across from Akazawa with a document titled "Japan Invest America" and a sum of "$400bn". The figure was scored out with "$500" hand-written above it.
Japan is the largest investor in the US. Together with pension giant GPIF and Japanese insurers the country has about $2-trillion (R35-trillion) invested in US markets.
Bank of Japan data shows direct Japanese investment in the US was $1.2-trillion (R21-trillion) at the end of 2024, and Japanese direct investment flows amounted to $137bn (R2.4-trillion) in North America last year.
Speaking later at the White House, Trump expressed fresh optimism that Japan would form a joint venture with Washington to support a gas pipeline in Alaska long sought by his administration.
Trump aides are feverishly working to close trade deals ahead of the August 1 deadline. Trump has repeatedly pushed back under pressure from markets and intense lobbying by industry. By that date, countries are set to face steep new tariffs beyond those Trump has imposed since January.
The US president has announced framework agreements with Britain, Vietnam and Indonesia and paused a tit-for-tat tariff battle with China, though details are yet to be worked out with the countries.
At the White House, Trump said negotiators from the EU would be in Washington on Wednesday.
Reuters
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