President Donald Trump announced a “massive” deal with Japan, including “reciprocal” tariffs of 15% on the country’s exports to the United States, with auto duties reportedly being lowered to that level as well. The agreement is considered “perhaps the largest Deal ever made,” and Japan will invest $550 billion into the United States, receiving 90% of the profits. The deal will create “Hundreds of Thousands of Jobs.”
Japanese Prime Minister Shigeru Ishiba said that auto tariffs on Tokyo will be lowered to 15%, from the current 25% levied across countries. Auto exports to the U.S. are a cornerstone of Japan’s economy, making up 28.3% of all shipments in 2024. The country’s overall exports to the U.S. stood at 10.3 trillion yen ($70.34 billion) between January to June, a 0.8% year-on-year drop.
Japan’s markets jumped after the deal announcement, with major auto stocks soaring, some over 10%, while the broader Nikkei 225 gained more than 2%. Shares in Japan’s Honda rose over 8%, Toyota climbed above 11%, Nissan jumped more than 8%, Mazda Motor surged 17%, and Mitsubishi Motors popped 13%.
Jeremy Schwartz, global CIO at asset manager Wisdomtree, told CNBC’s “Squawk Box Asia” that the market reaction meant that the market got very pessimistic on how things were progressing, overly pessimistic. Trump is using these deals to not just even out the trade deficit but also to drive strategic spending in the U.S., such as a planned investment by Softbank, OpenAI, and Oracle of up to $500 billion in artificial intelligence infrastructure over the next four years.
