OTTAWA – The Japanese government and business leaders are praising the informal trade deal struck with the U.S. on July 22, although American automakers are nervous.
Japan’s chief cabinet secretary Yoshimasa Hayashi confirms details Wednesday at a Tokyo press conference.
He says Japan’s economic revitalization minister and top trade negotiator met with President Trump in Washington where “there was a discussion on the spot regarding the U.S.-Japan negotiations on tariffs (and) there was an agreement reached.” That included a cut in auto-specific tariffs (including parts) from 27.5% to 15%, aiding what Hayashi hails as “our core industry, the auto and auto parts industry.” He also notes that Japanese auto exports to the U.S. will proceed “without any volume restrictions.”
Hayashi anticipates the deal will take effect Aug. 1, with negotiators “thinking about the national interest of both countries.” That said, existing 50% levies on Japanese steel and aluminium were not included, about which “there will be a robust discussion,” the minister says.
A White House statement released Wednesday afternoon says: “Longstanding restrictions on U.S. cars and trucks will be lifted, granting U.S. automakers access to the Japanese consumer market; U.S. automotive standards will be approved in Japan for the first time ever.”
It stresses how the agreement involves the creation of a new $550 billion Japanese/U.S. investment vehicle focused on America, which “will unleash the full potential of the U.S. economy (and) strengthen vital supply chains.” Details of how the auto sector will benefit have not yet been released by the Japanese or U.S. governments, and the formal text of the deal is still awaited. Analysts in Tokyo say there are no indications yet about whether this investment program will benefit the auto industry.
Writing on his Truth Social account, Trump adds: “Remember, Japan is, for the first time ever, OPENING ITS MARKET TO THE USA, even to cars, SUV’s, Trucks…which was always a complete NO, NO. The Open Market Japan may be as big a profit factor as the Tariffs themselves but was only gotten because of the Tariff Power.”
Former Missouri Gov. Matt Blunt, president of the American Automotive Policy Council representing the three major U.S. automakers – Ford, General Motors and Stellantis – was less thrilled, however. “American automakers still need to review the details of the U.S.-Japan agreement, but any deal that charges a lower tariff for Japanese imports with virtually no U.S. content, than the tariff imposed on North American-built vehicles with high U.S. content, is a bad deal for U.S. industry and U.S. auto workers,” he tells WardsAuto.
Japan’s exports of passenger vehicles to the U.S. have been significant and steady, with UN trade data valuing them at $40.7 billion in 2024 and $40.8 billion in 2023, up from COVID-impacted trade levels of between $32 billion and $33 billion in the years 2020 to 2022.
By contrast, U.S. exports of the same vehicles have been significantly lower, at $852 million in 2024, $1.2 billion in 2023 and with COVID-era sales down to $700 million-$800 million (2020-2022).
Japan exported nearly 1.37 million vehicles to the U.S. in 2024, according to the Japan Automobile Manufacturers Assn., accounting for slightly more than 30% of all Japan’s auto exports. The value of Japanese exports of all autos and auto parts to the U.S. last year was ¥7.2 trillion ($49.2 billion).
As a result, Japan’s car companies were relieved after fears that the U.S. might have imposed a crippling 50% tariff were not realized, although a 15% duty is still a hurdle and manufacturers are planning how to manage that figure.
“The 15% is not good news for the industry, but compared to what was suggested, it is better news,” says Koji Endo, an auto sector analyst with Tokyo-based SBI Securities.
Endo anticipates that Japanese automakers will “try to offset that 15% as much as possible, firstly by gradually raising sticker prices when new models are introduced, although not all the way to cover the 15% increase.”
To make up the rest, manufacturers will carry out internal cost reductions, Endo tells WardsAuto, including by reviewing supply chains and increasing local production of components.
But he says Japanese companies are unlikely to dramatically increase output at new plants in the U.S. to make more duty-free autos for the American market.
“Production costs in the U.S. are among the highest in the world, so there is no way that Japanese companies will reduce exports and increase production in the U.S.,” he says. “It’s unthinkable.”
Instead, Endo predicts Japanese companies will shoulder the added tariffs, anticipating their removal by a future U.S. administration.
JAMA Chairman Masanori Katayama says the deal has helped curtail an impact that would have been catastrophic, but JAMA “continues to seek a business environment based on open and free trade.”
Speaking to WardsAuto, David Adams, Global Automakers of Canada president, says of the new deal: “ (Japan) seem to be pretty chuffed about it. Our members and the industry in Canada will be not impressed that the Japanese may be getting a better deal than the USMCA (U.S.-Mexico-Canada Agreement) partners Canada and Mexico.” As it stands, Canada auto exporters pay 25%, with a discount for American parts content – which Adams sees as a 12.5% duty – but he adds “it is still 25% (Canada) versus 15% (Japan) as the top-line figure.”
Meanwhile, he says the Canadian government has been signaling that a U.S.-Canada deal may not be struck by the anticipated deadline of Aug. 1 and Adams has additional concerns, given 2026 talks on renewing the USMCA are looming. “I don’t want to be giving away the farm in this dialogue because we’ll be asked for more concessions next year,” he notes.
That said, Japan’s trade deal still leaves the country worse off than the 2.5% duty paid under Trump’s predecessor, President Joe Biden. “It’s not a great deal compared to what they had previously but compared to what they were facing it’s a good deal from their perspective,” Adams says.
– with Julian Ryall in Tokyo
AloJapan.com