Japan and U.S. both claim win in surprise 11th-hour tariff deal

Japan Times

2 days ago

Japan and the United States reached a surprise trade deal on Tuesday in Washington after months of fruitless negotiations and some tense moments, with both sides taking victory laps and Japanese markets cheering the news.
The United States is promoting it as the deal of the century. For Japan, it was a mission-accomplished moment.
The agreement, the details of which are still being ironed out, includes a 15% "reciprocal" tariff on most Japanese goods and 12.5% on cars, with 50% tariffs on steel and aluminum remaining unchanged.
Japan has agreed to buy more rice, improve market access and invest in a $550 billion fund that will support strategic industries and technologies in the United States.
'There has never been anything like it,' U.S. President Donald Trump wrote on Truth Social.
The reciprocal tariff is 10 percentage points lower than the rate that had been scheduled to kick in on Aug. 1, while the auto tariff has been cut by half from 25%. The total for autos will now be 15%, including 2.5% duty on autos charged independent of Trump tariffs.
'I firmly believe we have achieved an agreement that protects what needs to be protected, while aligning with the national interests of both Japan and the United States,' Ryosei Akazawa, Japan's chief tariff negotiator, said Tuesday in Washington.
Prime Minister Shigeru Ishiba noted that the 15% reciprocal tariff is the best rate achieved by a trade surplus country.
The Nikkei 225 stock index rose 3.51% in trading Wednesday, with Toyota up 14.35% and Honda 11.15%. The yen traded steady in the ¥146 to the dollar range.
Washington assured Tokyo that for strategically important goods, such as semiconductors and pharmaceutical products, tariffs for Japan will always match the best rate charged to other countries, Akazawa told reporters.
He also said that Japan will increase American rice imports under the current minimum access framework, which has allowed roughly 770,000 metric tons of foreign rice to enter Japan annually tariff free.
Japan and the United States will make efforts to strengthen supply chains through Japanese investment in the U.S., with a focus on semiconductors, pharmaceuticals, steel, shipbuilding, critical minerals, aerospace, energy, automobiles, artificial intelligence and quantum technology.
Japanese government-affiliated financial institutions will provide up to $550 billion in equity investments, loans and loan guarantees, Akazawa said.
He noted that defense spending targets were not included in the deal, and that Japan made no commitments to lower tariffs on U.S. products, as they are already very low.
Finance Minister Katsunobu Kato said on Wednesday that the deal does not include any agreements on the yen-dollar exchange rate.
'I'm kind of surprised," said William Chou, deputy director of Hudson Institute's Japan Chair, in discussing the auto tariffs. The fact that Japan was able to cut the rate by 12.5 percentage points is a huge accomplishment, he said.
Chou added that Japan has promised access and reforms that in the eyes of the U.S. administration "create a long-term pathway towards trade balance.'
But Ryo Sahashi, a professor at the University of Tokyo's Institute for Advanced Studies on Asia, called the deal "an extremely limited win."
'What we've achieved is merely a reasonably decent result compared to the worst-case scenario,' he said. 'Japan has simply escaped the worst possible situation, nothing more.'
The U.S. president announced the deal after a 70-minute meeting at the White House with Akazawa, who arrived in Washington on Monday for an eighth round of negotiations with the Trump administration.
Prior to the meeting at the White House, Akazawa met with U.S. Commerce Secretary Howard Lutnick for more than two hours Monday evening and Treasury Secretary Scott Bessent for about 30 minutes Tuesday afternoon.
'It was a tense and high-stakes negotiation,' Akazawa said of his meeting with Trump. 'Both sides were fully serious and operating at the limit.'
On X, Akazawa posted a photo in the White House with a hashtag that translates to #MissionComplete.
People react as they read a newspaper special edition reporting on the U.S.-Japan tariff deal, in Tokyo on Wednesday. |
REUTERS
Ishiba — who has come under immense pressure to resign after the ruling coalition suffered a defeat in an Upper House election and lost its majority in the chamber — took credit Wednesday morning in Tokyo, saying the deal is a result of efforts made by his administration since February.
'This is precisely about prioritizing investment over tariffs,' Ishiba said. 'Since I proposed this idea to President Trump during the summit at the White House in February, I have consistently advocated for it and strongly pushed the U.S. side, and this agreement is the result of those efforts.
'I believe this will contribute to Japan and the United States working together to create jobs and promote high-quality manufacturing, thereby fulfilling various roles on the global stage moving forward,' he told reporters.
News reports on Wednesday in Tokyo indicated Ishiba might resign by the end of August, though the prime minister denied this later in the day.
'Ironically, the Ishiba administration appears destined to be driven from office, with this tariff negotiation success potentially becoming its greatest — and final — achievement,' said Sahashi.
But even if the leadership changes, Japan is likely to stick to the deal as part of Ishiba's legacy, said Hudson Institute's Chou.
"I don't think a different leader would have necessarily been able to find a different path,' Chou said.
The surprise breakthrough comes just ahead of an Aug. 1 deadline set by Trump in which the reciprocal rate for Japan was set to rise to 25%, up from the baseline 10%.
Japan had previously eyed a meeting between Ishiba and Trump at the Group of Seven summit in June to reach a framework agreement, but auto tariffs had been a major sticking point.
In the recent weeks leading up to Tuesday's agreement, Trump had expressed frustration with Japan and the pace of negotiations with the country, at one point threatening to take the reciprocal rate as high as 35%.
'I think both sides can claim that they got parts of what they wanted,' Chou said, while adding that the question now is whether Japan can carry out the pledges it has made.
'We'll have to see how that is carried out. I'm sure the Trump administration will also be paying very close attention."