WASHINGTON/TOKYO — President Donald Trump announced on Tuesday (July 22) that the US and Japan had reached a trade deal that involves a reduced 15 per cent tariff on US imports from Japan, including automobiles.

Trump revealed on Truth Social that the agreement would also include Japanese investments totaling US$550 billion (S$703 billion) in the United States.

Furthermore, Japan has agreed to expand market access for American car manufacturers, as well as for producers of trucks, rice, and certain agricultural products, among others.

Although Trump's post did not mention easing tariffs on Japanese motor vehicles, which currently face a 25 per cent tariff, NHK reported that the deal would lower the auto tariff to 15 per cent, citing a Japanese government official.

"This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan," Trump conveyed on the social media platform.

Japan is a crucial trading partner for the US, with the two-way trade in goods amounting to nearly $230 billion in 2024. Japan maintains a trade surplus of nearly $70 billion with the US. According to US Census Bureau data, Japan ranks as the fifth-largest US trading partner in goods.

Following the announcement, Japanese stocks surged, particularly in the automaker sector with Honda, Toyota, and Nissan all seeing gains of six per cent or more. US equity index futures also rose and the yen strengthened against the dollar.

Reuters was unable to immediately verify the specifics of the deal announced by Trump, and information was limited. The White House did not respond promptly to requests for additional details.

Speaking on Wednesday in Tokyo, Japanese Prime Minister Shigeru Ishiba mentioned that he had received an initial report from the Japanese trade negotiator in Washington but refrained from commenting on the negotiation details.

Ishiba, who faces significant political pressure in Japan following the ruling coalition's loss of control in the upper house election on Sunday, stated that he could not determine the impact of the trade deal on his decision to step down until he reviewed the specifics.

'Mission complete'

Trump's announcement came after a meeting with Japan's chief tariff negotiator, Ryosei Akazawa, at the White House on Tuesday, as per a source familiar with the situation.

"#Mission Complete," Akazawa posted on X.

Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, expressed optimism that with the 15 per cent tariff rate, the Japanese economy could evade recession.

Kristina Clifton, a senior economist at the Commonwealth Bank of Australia in Sydney, stated that the deal was a favorable outcome for Japan compared to potential scenarios given Trump's earlier tariff threats.

Clifton noted, "Steel, aluminum, and cars are crucial exports for Japan, so it'll be interesting to see if there are any specific provisions for those sectors."

Although automobiles play a significant role in US-Japan trade, the flow is predominantly one way from Japan to the US, a situation that has long concerned Trump. In 2024, the US imported over $55 billion worth of vehicles and automotive parts from Japan, while just over $2 billion were sold from the US to the Japanese market.

Later at the White House, Trump also expressed optimism about Japan potentially partnering with Washington on a gas pipeline project in Alaska, a long-desired initiative by his administration.

Initially skeptical of the project's practicality, Japanese officials warmed up to it, along with various other investments dear to Trump, as potential incentives to resolve trade disputes with Washington.

Trump's team is actively working to finalize trade agreements before an August 1 deadline, which the president has repeatedly extended under pressure from markets and industry lobbying. By that date, countries could face new steep tariffs beyond those already imposed by Trump since taking office in January.

While Trump has indicated that unilateral rate declarations serve as agreements, his team is striving to close deals. Trump has announced preliminary agreements with Britain, Vietnam, Indonesia, and paused a tariff dispute with China. However, details are still being ironed out with these countries.

Trump mentioned that negotiators from the European Union would be visiting Washington on Wednesday.

Trump's announcement on Tuesday mirrored his approach in previous agreements, where he disclosed the deal on social media shortly after discussions with foreign officials, leaving many specifics undisclosed until later. Nearly three weeks after announcing an agreement with Vietnam in a similar manner, no formal statement has been released by either country outlining the deal specifics.