By lowering auto duties on Japan to 15%, Donald Trump is handing the Asian ally a decent win and making a big concession on his flagship sectoral levies. For other countries negotiating with Washington, it suggests that everything except a 10% baseline tariff is up for grabs.
U.S. President Donald Trump shakes hands with Japan's Prime Minister Shigeru Ishiba at the White House in Wash ington, U.S., February 7, 2025. REUTERS/Kent Nishimura/File Photo HONG KONG, July 23 - Everything is up for grabs.
That's the takeaway from the U.S.-Japan trade pact Donald Trump and Shigeru Ishiba revealed on Wednesday. By setting tariffs on U.S. imports from the Asian country at 15%, including autos, the U.S. president is handing Japan's prime minister a decent win but also beating a big retreat on his flagship "sectoral tariffs". It further complicates Washington's regime ofswirling after a bruising election result for his coalition at the weekend, Ishiba declared that his country, which shipped $150 billion in Japanese goods to America last year, had secured the best deal among those that have a trade surplus with the United States. That is true, so far. The agreement puts the tariff 10 percentage points lower than the levy Trump had threatened. The UK secured 10%, but it exports more to the U.S. than it imports.The surprise is that Japan's deal breaks Trump's tariff template. He pledged there would be separate levies for autos, pharmaceutical goods, steel and semiconductors. Handing the Asian giant a 15% flat rate on auto exports, which comprise nearly 30% of Japan's U.S. shipments, rather than the 25% sectoral rate, suggests nothing about Trump's tariff regime is set in stone besides the 10% baseline duty he has imposed on all of America's global trading partners. The outlook for Japanese carmakers will further brighten if Trump sets equal or lower tariffs on imports from Canada and Mexico. Take Toyota Motor. The world's largest carmaker sold 2.3 million cars in the U.S. last year – 23% of its global total – and produced more than half that amount there. But it also made around 800,000 vehicles in Canada and Mexico. Honda Motorwill find it especially painful if auto tariffs on those two countries remain at 25%. South Korea, another big Asian auto exporter, also will now hope to win an exemption.led a broader jump in stocks. Meanwhile, the yield on five-year government bonds rose 9 basis points to 1.11%, the highest since April 1. The Bank of Japanunsurprisingly struck a more sober tone because, in the end, it is still a blow for the struggling $4 trillion economy: last year, 53% of Japan’s exports to the U.S. crossed the Pacific tariff-free, BNP Paribas analyst William Bratton notes. Other sops in the deal look less material and well-designed for Trump to tout to an American public. These include a $550 billion commitment for Japan to invest in the U.S. This is nearly four times the value of Japan's exports to America, but SoftBankhad already pledged to invest $100 billion stateside over the next four years. Ishiba also clarified that his country's pledge to import U.S. rice would be under its "minimum access", so Japan's powerful lobby of farmers will remain protected. If Ishiba does resign following this deal, he may at least avoid beingPresident Donald Trump on July 23 said on Truth Social that the U.S. had reached a trade deal with Japan that will set reciprocal tariffs on imports from the country at 15%. He also said that Japan will invest, at his direction, $550 billion into the U.S. Japan's Prime Minister Shigeru Ishiba confirmed that the deal includes setting import tariffs on Japanese autos at 15% and that the pledged investment would include loans. Trump added that Japan will open up its country to U.S. imports of cars, trucks, rice and other agricultural products. Japan would raise a portion of rice imports from the U.S. within its minimum access framework, Ishiba said. His country had obtained the best deal among countries that have a trade surplus with the U.S. Japanese broadcaster NHK reported, citing Japanese government officials, added that the two countries agreed to keep the current 50% tariff on steel and aluminium. Una Galani is Asia Editor of Reuters Breakingviews, based in Hong Kong, overseeing a team of columnists across the region. She was previously in London, Dubai and Mumbai. Breakingviews is the global financial commentary brand of Reuters delivering agenda-setting insight in real time on the most important events impacting global markets and companies.
RATI:REGULATORY-POLICY BRV CLM REP TOPNWS ALU ALUM ANLINS AUT AUTO BACT BASMTL BIZ BMAT BRVBV CARM COM CYCS DEAL1 DIP ECI ECO FERR GEN MCE METL MIN MINE MTAL NEWS1 POL POTUS STE TOPCMB TRACC TRD TRF WASH XDNP XPCO XPMF XRNP SASIA EASIA AMERS IN US NAMER ASXPAC EMRG ASIA JP RHPI:MERGERS-ACQUISITIONS RATI:ADAS-AV-SAFETY MTGFX BRVF BISV BNK BNKS BNKS1 BOJ BSVC CARM1 CEN CMPNY FIN FINS GOVACT HECA PHAR PHAR08 PHMR PUBL SEMI TECH TEEQ TMT CA MX CAMER LATAM N2:IN N2:ASIA N2:BACT N2:AUTO N2:CARM N2:DEAL1 N2:STE N2:ALU N2:DIP N2:ALUM N2:US N2:TRACC N2:POTUS N2:WASH N2:TRD N2:TRF N2:JP N2:MTAL N2:EMRG N2:SASIA N2:ASXPAC N2:CYCS N2:COM N2:METL N2:FERR N2:BASMTL N2:GEN N2:POL N2:BMAT N2:MINE N2:MIN N2:AMERS N2:NAMER N2:MCE N2:ECI N2:EASIA N2:GOVACT N2:PHAR N2:SEMI N2:CA N2:MX N2:CMPNY N2:CARM1 N2:PUBL N2:BOJ N2:BNKS1 N2:BNKS N2:HECA N2:PHMR N2:PHAR08 N2:TECH N2:TEEQ N2:TMT N2:CAMER N2:LATAM N2:CEN N2:BSVC N2:FINS N2:BISV
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