U.S. and Japan finalize trade deal with 15% Trump tariffs

U.S. President Donald Trump signed an executive order Thursday stateside to implement a trade deal with Japan, with 15% baseline tariffs on most Japanese goods, including autos.

The deal had been reached in July after months of negotiations, with Washington and Tokyo continuing to haggle over details for weeks before it was signed.

As part of the deal, Tokyo agreed to invest $550 billion in projects selected by the U.S. government and ramp up its purchase of American agricultural products, such as corn and soybeans, as well as U.S.-made commercial aircrafts and defense equipment.

The U.S. ally in Asia will also offer “breakthrough openings in market access” in the manufacturing, aerospace, agriculture and automobile sectors, the Thursday order said. The agreement reached in July had included Japan purchasing 100 Boeing planes, 75% higher imports of U.S. rice and $8 billion worth of agricultural and crop products.

Washington will apply a baseline 15% tariff on nearly all Japanese imports, with separate sector-specific levies for automobiles and parts (also 15%), aerospace products, generic pharmaceutical goods and natural resources, according to the executive order.

The Thursday order prevents Trump’s country-specific tariffs on top of existing levies. The lower tariffs will apply retroactively to Japanese goods “entered for consumption or withdrawn from warehouse for consumption on or after 12:01 a.m. eastern daylight time on August 7, 2025,” the order stated. The tariff relief on automobiles is set to take effect after seven days.

Trump’s global tariff campaign has thrown the global supply chain into disarray, in particular Japan’s massive auto sector. Last month, Toyota warned that it expected a hit of nearly $10 billion as Trump’s tariffs on autos weighed on its sales to the U.S., forcing it to slash by 16% its forecast for full-year operating profits.

Tariffs are expected to hit rivals as well, with Ford’s pre-tax adjusted profit reportedly set to drop $3 billion while GM projects $4 billion to $5 billion hit for the year.

Japan’s top trade negotiator, Ryosei Akazawa, who was in Washington, delivered a letter from Japan’s Prime Minister Shigeru Ishiba inviting Trump to visit his country, Kyoto News reported. The Japanese official had reportedly canceled his trip to the U.S. last month as some sticking points required “further technical discussion.”

The finalizing of the deal came as political pressure for the Japanese leader mounts at home. The ruling Liberal Democratic Party earlier this week released a long-awaited report on why it lost seats in the upper house election in July.

The report ascribed the loss to the lack of appeal for the party’s measures aimed at taming inflation, previous political scandals and weak mobilization of young voters.

Local media reports suggested many key members of the LDP have signaled their intention to resign to the prime minister, while Ishiba has said he intends to stay on amid calls within his party for choosing another leader.

Though the reports have avoided naming individuals, they signal an “implicit indictment of Ishiba’s leadership of the party,” said James Brady, vice president at political consultancy Teneo.

Analysts at Eurasia Group suggested in a report Friday that Ishiba is unlikely to survive a challenge from within the party next Monday, when a vote on whether to bring forward a leadership election is expected to take place.

“Ishiba’s poor performance as party leader in lower and upper house elections and events in recent days, including former prime minister Aso Taro announcing his support for the special election, have turned the tide against Ishiba,” analysts said, predicting a 60% odd of Ishiba’s defeat in the election, with him possibly resigning before the vote takes place as internal discontent grows.