Top Japanese and American officials said Wednesday they were able to reach a trade deal because Tokyo agreed to invest heavily in major projects in the United States.
Japanese Prime Minister Shigeru Ishiba said the approach helped his side secure a 15% tariff on goods its companies send to American markets, instead of the 25% levy that President Trump had threatened.
“With the idea of ‘prioritizing investment over tariffs,’ Japan and the U.S. have reached a deal that will benefit both sides. Automobile tariffs and reciprocal tariffs will be 15%. I sincerely thank [Mr. Trump] for his tremendous leadership,” Mr. Ishiba posted on X. “Together with the President, we will build a new Golden Era for Japan and the U.S.”
The lower car tariff is key for Japan and its export-heavy automobile sector. Normally, Mr. Trump is taxing car imports at 25%.
Mr. Trump said Japan plans to invest $550 billion in the U.S.
Treasury Secretary Scott Bessent stressed the importance of Japan’s commitment, calling it an “innovative financing mechanism.”
“They came to us with the idea of a Japan-U.S. partnership, where they are going to provide equity, credit guarantees and funding for major projects in the U.S.,” Mr. Bessent told Bloomberg Television. “He also said that the foreign direct investment pledge is ‘all new capital.’”
A White House official said the finer details of the investments will have to be negotiated separately.
According to Kyodo News, Mr. Ishiba said Japanese companies would lead the investment, particularly in the pharmaceutical and semiconductor industries, and that government-affiliated banks will also provide funding.
Mr. Ishiba, according to the wire service, said Japan would increase rice imports from the U.S. by up to 770,000 tons per year under a tariff-free framework. He said the deal does not require Japan to reduce tariffs on farm products, generally, so the domestic agricultural sector isn’t harmed.
The prime minister stressed, however, that the agreement does not include any reduction of Japanese tariffs, including those on farm products, and that no concessions were made that would undermine Japan’s agriculture sector.
Mr. Trump, meanwhile, hailed the potential for U.S. cars and trucks to make their way to Japanese markets.
Writing on Truth Social, he mused aloud Wednesday about his thinking on tariffs and how they’re a point of leverage.
“I will always give up Tariff points if I can get major countries to OPEN THEIR MARKETS TO THE USA. Another great power of Tariffs. Without them, it would be impossible to get countries to OPEN UP!!!” Mr. Trump said.
The deal is a major surprise after Mr. Trump described the Asian country as “spoiled” by years of favorable trade terms with the American market.
The U.S. had a nearly $70 billion trade deficit with Japan in 2024, meaning the Asian superpower sold a far higher dollar value in products to U.S. consumers versus what Japan bought from American producers.
Japan had been worried about the impact of tariffs on its export-heavy economy, though it managed to negotiate down its tariff amount to something closer to the 10% blanket tariff Mr. Trump is imposing on all exports.
It is unclear if the U.S. will offer a similar deal to places like the European Union, which is trying to stave off a 30% tariff, effective Aug. 1, on products it sends to the U.S.
Mr. Bessent downplayed reports the EU is preparing retaliatory tariffs of 30% on $117 billion worth of U.S. goods, in case a deal cannot be reached.
“it’s a negotiating tactic, and it’s what I would do if I were in their place,” Mr. Bessent said.