Details of Japan-U.S. Tariff Deal

The White House announced details of its tariff deal with Japan, which both countries agreed on July 22nd. Japan pledged in the deal $550 billion investment to the United States and $8 billion purchase of U.S. agricultural products. In return, the U.S. will reduce “reciprocal” tariff rate on Japan from announced 25 percent to 15 percent. The White House named it “a historical trade and investment agreement,” hoping it to work as a model for deals with other countries. 

The White House welcomed that $550 billion investment as “the single largest foreign investment commitment ever secured by any country” and expected it to “generate hundreds of thousands of U.S. jobs, expand domestic manufacturing, and secure American prosperity for generations.” Japan is going to endorse the investment by private sectors with financial support by creating new framework for loans in governmental financial institutions in Japan.

 

The investment will be promoted in various area. The White House listed up energy infrastructure, semiconductor, critical minerals, pharmaceutical and medical production and commercial and defense shipbuilding as the businesses related to the agreement. The President Donald Trump explained that 90 percent of the profit from those projects will be retained by the United States.

 

The headline on the front pages of Japanese newspapers was mainly about Japan’s purchase of U.S. rice. The White House argued that Japan would immediately increase imports of U.S. rice by 75 percent. Japan has annual 770 thousand tons of “minimum access” quota for imported rice with no tariff.

 

In 2024, Japan imported 346 thousand tons (45 percent) of the minimum access rice from the U.S., while 286 thousand tons from Thailand and 70 thousand tons from Australia. The Japanese government will increase rice import from the U.S. within the framework of the minimum access at expense of other countries. Japan is also importing $8 billion in U.S. goods including corn, soybeans, fertilizer, bioethanol and sustainable aviation fuel.

 

To attract U.S. President who dubs himself “tariff man,” Japan offered buying 100 aircrafts of Boeing and would seek new agreement on the project about liquefied natural gas in Alaska. To reduce non-tariff barrier on U.S. automobiles, Japan will ease the regulation in safety examination by introducing U.S. standard.

 

It is likely that Japan hoped to protect its cars by accepting those big purchases. Japan’s top negotiator, Ryosei Akazawa, told Trump that “car is the nation for Japan” in his first meeting in the White House in April, answering Trump’s remarks that “steel is the nation.” In the end of the day, Trump agreed on reducing tariff on Japanese cars from 27.5 percent to 15 percent. Japan also worked hard not to set a limitation of exporting cars, which was included the deal between the U.S. and the United Kingdom.

 

There appeared in Japan that it would be indispensable for Japan to have an official agreement between both leaders. Ishiba was grilled by opposition leaders on July 25th that the agreement had no official document which would endorse the deal. Japanese government is exploring an opportunity of a meeting by Trump and Prime Minister Shigeru Ishiba to sign the agreement, hoping it to extend life of Ishiba administration which is ailing with serious defeat in the Upper House election earlier this month.

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