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Japan and US finalize tariff deal to lower auto import duties by end of September
Japan and the United States are nearing the conclusion of a trade deal to reduce tariffs on Japanese automobile imports. The agreement, which aims to lower duties from the current 27.5% to 15%, is expected to take effect by the end of September, pending the issuance of an executive order by the US president.
Final negotiations underway ahead of the deadline
Japan’s chief trade negotiator, Ryosei Akazawa, arrived in Washington for three days of intensive talks, described as being in their "final phase." Both governments are working to ensure the executive order is issued within the next 10 to 14 days. According to Japanese government sources, the tariff reduction is anticipated to go into effect by the end of September, although the exact date remains under discussion. The order will formalize the July agreement, ensuring that the 15% rate will not be compounded with the higher existing tariffs. Goods previously taxed at lower rates will also be adjusted to the new percentage.
A $550 billion investment package shapes broader trade ties
The tariff deal is part of a broader trade agreement reached in July, which includes Japan’s pledge to invest $550 billion in the United States. This investment, backed by government loans and guarantees, is set to target strategic sectors such as semiconductors, pharmaceuticals, and rare earth minerals. Commerce Secretary Howard Lutnick stated that the investment would be directed toward critical industries under the guidance of President Trump.
Additionally, Japan has committed to increasing its imports of American rice by 75% and purchasing $8 billion worth of US goods, including corn, soybeans, and sustainable aviation fuel. The agreement also includes Japan’s acquisition of 100 Boeing aircraft and expanded defense equipment purchases from US manufacturers.
Japanese automakers still face challenges
While the reduced tariff rate offers some relief to Japanese automakers, companies such as Toyota, Honda, and Nissan continue to report significant financial impacts from US trade policies. Toyota recently lowered its operating profit forecast by $4.1 billion, citing tariff-related challenges. Similarly, Honda anticipates a $3 billion loss in operating profits this year due to trade restrictions.
Although the new 15% tariff is considerably lower than the previous 27.5%, it remains much higher than the pre-Trump era rate of 2.5%. Japanese automobile exports to the US fell by 24.7% year-on-year in May, reflecting the ongoing strain on the industry.
Legal hurdles and Supreme Court challenges
The tariff deal emerges amidst broader legal disputes over the Trump administration’s trade policies. A federal appeals court recently ruled many of the tariffs imposed under emergency powers to be unlawful, though they remain in effect until October 14 pending a Supreme Court appeal. The administration has requested an expedited hearing, seeking a decision by September 10 and arguments in November.
Despite these legal uncertainties, the Japan-US tariff agreement is moving forward independently. Both nations are working to finalize the arrangement after months of negotiations following initial discussions in July.
