US Japan Trade Deal Brings Mixed Fortunes for Global Auto Industry

The United States has signed a landmark trade agreement with Japan, reducing tariffs on Japanese exports to the US from 25% to 15%. The deal, whilst higher than the current 10% levy, represents a significant diplomatic breakthrough in US-Japanese trade relations.

President Trump announced via Truth Social that Japan would invest £550 billion in the United States as part of the agreement. The deal encompasses substantial Japanese commitments to open its economy to US exports of vehicles, agricultural products, and various other commodities.

Japanese Prime Minister Shigeru Ishiba confirmed the agreement would result in US duties on vehicles and parts falling to 15% without import quotas. The deal notably excludes steel and aluminium tariffs of 50%, with medicines and semiconductor chips scheduled for separate negotiations.

The market response was immediate and substantial, with Japanese automotive manufacturers experiencing significant share price increases. Mazda surged 17.8%, Subaru climbed 16.6%, whilst Toyota and Honda saw gains of 14.3% and 11.2% respectively. The broader Nikkei 225 index rose 3.51% to 41,171.32.

European manufacturers also benefited from the announcement, with Stellantis rising 8.6%, and both Porsche and Volvo gaining 6.6%. The positive market response reflects growing optimism about potential US-EU trade negotiations.

US domestic automakers have expressed concerns about the deal’s implications. The American Automotive Policy Council, representing Detroit’s major manufacturers, warned about potential disadvantages for US-built vehicles containing high domestic content compared to Japanese imports.

The agreement includes Japanese commitments to increase defence spending with US companies to £17 billion annually, purchase 100 Boeing aircraft, and boost agricultural imports by £8 billion. These provisions demonstrate the comprehensive nature of the trade package, extending well beyond automotive sector considerations.