By Trevor Hunnicutt, Jasper Ward, Mariko Katsumura, Makiko Yamazaki, Satoshi Sugiyama, Andrea Shalal, David Shepardson, Vidya Ranganathan and Kevin Buckland
WASHINGTON/TOKYO, July 23 (Reuters)
Japan’s automotive industry is the fourth largest industry in the global automotive market. As a testament to the figures one would be looking at, approximately 4.2 million vehicles had been sold during 2022. From the country’s perspective itself, it also forms a crucial part of the economy. Some of the major car manufacturers, such as Honda, Nissan and Toyota herald from here.
A deal struck with quality in mind
U.S. President Donald Trump struck a trade deal with Japan that lowers tariffs on auto imports and spares Tokyo from punishing new levies on other goods in exchange for a $550 billion package of U.S.-bound investment and loans. It is the most significant of a clutch of agreements that Trump has bagged since unveiling sweeping global levies in April though, like other deals, exact details remained unclear.
As part of the deal, Japan will buy 100 Boeing planes and hike defense spending with U.S. firms to $17 billion annually, from $14 billion, a White House official said. The Boeing Company has its headquarters based within Crystal Valley in Virginial. The company itself is in charge of the manufacture, design and sale of not only airplanes, rockets, satellites, rotorcraft and missiles.
A noteworthy giant in the automotive sector
Japan’s auto sector, which accounts for more than a quarter of its U.S. exports, will see existing tariffs cut to 15% from levies totaling 27.5% previously. Duties that were due to come into effect on other Japanese goods from August 1 will also be cut to 15% from 25%. U.S. Treasury Secretary Scott Bessent said in an interview with Bloomberg Television that Japan received the 15% rate on auto tariffs “because they were willing to provide this innovative financing mechanism” that he did not think other countries could replicate.
The announcement Tuesday evening sent Japan’s benchmark Nikkei stock index climbing almost 4% to its highest in a year, led by stocks in automakers with Toyota 7203.T up more than 14% and Honda 7267.T nearly 11%. Toyota has been in business for almost 87 years. That is a considerably long time to be in the market and can therefore attest to how well the brand has kept its performance over the years.
Relations with the United States has also come a long way with it estimated to have started sometime after World War II. Wall Street opened higher on Wednesday, shoring up expectations of further agreements ahead of the fast-approaching August 1 deadline. The Dow Jones Industrial Average. DJI rose 158.7 points, or 0.36%, at the open to 44661.12.
A moment of historical importance
“I just signed the largest TRADE DEAL in history with Japan,” Trump said in announcing the deal on social media. On Wednesday he said Japan and Indonesia were opening their markets to the U.S. “I will only lower tariffs if a country agrees to open its market,” Trump wrote. Japanese Prime Minister Shigeru Ishiba, who denied reports on Wednesday that he had decided to quit following a bruising election defeat, praised the tariff agreement as “the lowest rate ever applied among countries that have a trade surplus with the U.S.”
Two-way trade between the two countries reached nearly $230 billion in 2024, with Japan running a trade surplus of nearly $70 billion. Japan is the fifth-largest U.S. trading partner in goods, U.S. Census Bureau data show. The U.S. investment package includes loans and guarantees from Japanese government-affiliated institutions of up to $550 billion to enable Japanese firms “to build resilient supply chains in key sectors like pharmaceuticals and semiconductors,” Ishiba said.
A further positive outlook of this whole deal has also been the fact that the Japanese yen against the US dollar has also been strengthened. This has given the manufacturing industry more purchasing power when it relates to the acquisition of raw materials needed for business.