President Donald Trump on Tuesday said the US and Japan have struck a deal that will lower the hefty tariffs Trump had threatened to impose on goods from its Asian ally while extracting commitments for Japan to invest $550 billion in the US and open its markets to American goods.

The agreement – including a 15% tariff on all imported Japanese goods, down from a proposed 25% – is the most significant of the string of trade deals the White House has reached ahead of an approaching August 1 deadline for higher levies to kick in.

‘This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan,’ Trump said on his Truth Social platform.

Industry and government officials briefed on the agreement said the deal also lowers the tariff to 15% from 25% on Japanese autos, which account for more than a quarter of all the country’s exports to the US.

The announcement ignited a rally in Japanese stocks, with the benchmark Nikkei climbing 2.6% to its highest in a year. Shares of automakers surged in particular, with Toyota up more than 11%, and Honda and Nissan both up more than 8%.

The exuberance extended to shares of South Korean carmakers as well, as the Japan deal stoked optimism that South Korea could strike a comparable deal. The yen firmed slightly against the dollar, and US equity index futures edged upward.

But US automakers signalled their unhappiness with the deal, raising concerns about a trade regime that could cut tariffs on auto imports from Japan to 15% while leaving tariffs on imports from Canada and Mexico at 25%.

Matt Blunt, who heads the American Automotive Policy Council which represents General Motors, Ford and Chrysler-parent Stellantis, said ‘any deal that charges a lower tariff for Japanese imports with virtually no US content than the tariff imposed on North American-built vehicles with high US content is a bad deal for US industry and US auto workers.’

Reuters could not immediately confirm all the elements of the deal announced by Trump, and details were scant. The White House did not immediately respond to a request for additional details.

Speaking early on Wednesday in Tokyo, Japanese Prime Minister Shigeru Ishiba said he had received an initial report from his trade negotiator in Washington but declined to comment on the specifics of the negotiation.

Ishiba is under intense political pressure in Japan, where the ruling coalition was set back by losing control of the upper house in an election on Sunday.

Ishiba said he couldn’t say how a trade deal would affect his decision on whether to step down from office until he saw the details.

‘Mission complete’

Two-way trade between the two countries totalled nearly $230 billion in 2024, with Japan running a trade surplus of nearly $70 billion. Japan is the fifth-largest US trading partner in goods, US Census Bureau data show.

Autos are a huge part of US-Japan trade, but almost all of it is one way to the US from Japan, a fact that has long irked Trump. In 2024, the US imported more than $55 billion of vehicles and automotive parts while just over $2 billion were sold into the Japanese market from the US.

Trump’s announcement followed a meeting with Japan’s top tariff negotiator, Ryosei Akazawa, at the White House on Tuesday, according to a person familiar with the matter.

‘#Mission Complete,’ Akazawa wrote on X.

Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, said that ‘with the 15% tariff rate, I expect the Japanese economy to avoid recession.’

The deal was ‘a better outcome’ for Japan than it potentially could have been, given Trump’s earlier unilateral tariff threats, said Kristina Clifton, a senior economist at the Commonwealth Bank of Australia in Sydney.

‘Steel, aluminium, and also cars are important exports for Japan, so it’ll be interesting to see if there’s any specific carve-outs for those,’ Clifton said.

Japan is the largest investor in the United States. Together with pension giant GPIF and Japanese insurers, the country has about $2 trillion invested in US markets.

Besides that, Bank of Japan data shows direct Japanese investment in the United States was $1.2 trillion at the end of 2024, and Japanese direct investment flows amounted to $137 billion in North America last year.

Speaking later at the White House, Trump also expressed fresh optimism that Japan would form a joint venture with Washington to support a gas pipeline in Alaska long sought by his administration.

‘We concluded the one deal ... and now we’re going to conclude another one because they’re forming a joint venture with us at, in Alaska, as you know, for the LNG,’ Trump told lawmakers at the White House. ‘They’re all set to make that deal now.’

Japanese officials had initially doubted the practicality of the project but warmed to it – and a range of other investments dear to Trump – as a potential incentive to resolve trade disputes with Washington.

Trump aides are feverishly working to close trade deals ahead of an August 1 deadline that Trump has repeatedly pushed back under pressure from markets and intense lobbying by industry. By that date, countries are set to face steep new tariffs beyond those Trump has already imposed since taking office in January.

While Trump has said that unilateral letters declaring what rate would be imposed are tantamount to a deal, his team has nonetheless raced to close agreements. Trump has announced framework agreements with Britain, Vietnam, Indonesia and paused a tit-for-tat tariff battle with China, though details are still to be worked out with all of those countries.

At the White House, Trump said negotiators from the European Union would be in Washington on Wednesday.

Trump’s announcement on Tuesday was of a pattern with some previous agreements. He announced the deal on social media, leaving many key details a mystery, and before the other country issued its own proclamations.

Nearly three weeks after Trump announced an agreement with Vietnam – in similar fashion – no formal statement has been released by either country spelling out the particulars of the deal that was ostensibly reached.