Japan Reaches 15% Tariffs Deal In Exchange For $550 Billion US Investment

Japanese automakers can breathe a little easier after the Trump administration brokered a deal overnight with the Japanese government to reduce US tariffs on the country’s cars and auto parts, as well as certain other goods. It means popular Japanese-made cars like the Mazda CX-5 will likely avoid hefty price hikes – though not entirely scot-free.

The tariffs currently stand at 27.5% but will be reduced to 15% under the new deal. In return, the Japanese government will commit up to $550 billion in loans and other guarantees to Japanese firms investing in the US.

A Win-Win Deal

The full details of the agreement haven’t been released, but Japanese Prime Minister Shigeru Ishiba said in a press briefing that the investments would be in the areas of supply chains and other key sectors like pharmaceuticals and semiconductors, Reuters reported.

Separately, a Trump administration official told Reuters that Japan will increase purchases of agricultural products in an effort to help reduce the country’s trade surplus with the US, which last year stood at nearly $70 billion.

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The US is Japan’s single biggest market for autos and parts, with exports here in 2024 totaling around $55 billion. Conversely, Japan only imports around $2 billion worth of autos from the US. Among the most popular Japanese-made cars imported into the US – and thus set to benefit from the new deal – is the Mazda CX-5, which last year managed 134,088 sales here. The Subaru Outback is another top seller, with 168,771 sales last year, though the current generation is built here, while the next-generation 2026 Outback will be built in Japan.

Hope For Other Countries

Japan’s 15% rate is currently the lowest for any country running a trade surplus with the US, and provides hope for other countries and regions that similar deals could be brokered. Europe, Canada, and Mexico also have significant car exports to the US but are still stuck with 25% tariffs – and 27.5% in the case of Europe.

The Trump administration is in negotiations with other countries ahead of its Aug. 1 deadline, after which the so-called “Liberation Day” reciprocal tariffs will be added, though the deadline has been pushed back previously and could be again. For Canada, it means tariffs could increase to around 35% on goods not covered by the previous USMCA agreement. For Europe, it could mean tariffs as high as 30%.

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US automakers are still on the hook for major tariffs, as many of their imports come from countries without deals. General Motors reported this week that its second-quarter profits took a $1.1 billion hit related to tariffs, while Stellantis said it expects a charge of around $350 million for the first half of the year due to tariffs – bringing its total losses for the period to an expected $2.7 billion.

Impacting More Than Just New Cars

While much of the talk around tariffs has been about how they affect new car prices, it’s been easy to forget there are huge implications for the used market, too. That’s because the tariffs are applicable not just to vehicles but to parts, too, meaning even older car owners stand to lose out if the tariffs remain high. JDM car culture is big in the USA, whether it’s classic Japanese hot hatches or collectors’ sports cars. The reduction in tariff rates means anyone bringing in new parts for these cars, like the heritage parts produced by Toyota, Nissan, and Mazda for their classics like the Celica Supra, 240Z, and first-gen Miata, among others.

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Source: Reuters