US-Japan Trade Deal Signed with Tariff Cuts, Lifting Japanese Auto Stocks

TradingKey - On Friday, Japanese automakers and parts suppliers collectively saw their stock prices rise, as markets reacted positively to the executive order signed by U.S. President Trump regarding the U.S.-Japan trade agreement.

Mazda Motor led the gains, surging nearly 6% intraday, followed by Nissan Motor at around 5%, while major automakers, including Toyota and Honda also rose more than 3%. Although gains moderated later, overall market sentiment was significantly boosted by the policy.

Source: Google Finance

The Trump administration formally signed an executive order on Thursday (September 4) announcing the implementation of the trade agreement with Japan, imposing a 15% base tariff on most Japanese goods including automobiles. Automotive tariff relief will take effect seven days later, retroactively applying to Japanese goods entering consumption after 12:01 a.m. Eastern Daylight Time on August 7, 2025.

Japanese imports previously subject to higher tariffs will not be double-taxed, while goods previously taxed below 15% will be adjusted to the new rate. Separate industry-specific treatments apply to automobiles and auto parts, aerospace products, non-patent medicines, and natural resources that cannot be naturally obtained or produced within the United States.

The agreement also confirms that Trump will not impose additional country-specific tariffs on top of existing ones, bringing stability to the trade environment.

In exchange, the Japanese government has committed to providing key market access for U.S. manufacturers, aerospace, agricultural, food, energy, automotive, and industrial producers, including accelerating the "minimum access" rice program to increase U.S. rice purchases by 75%, and buying U.S. agricultural products such as corn, soybeans, fertilizers, and bioethanol totaling $8 billion annually.

Additionally, Japan will invest $550 billion in projects selected by the U.S. government, expected to create hundreds of thousands of jobs and expand domestic manufacturing.

The signing of this executive order marks the final resolution of specific terms after months of negotiations following the framework agreement reached between the U.S. and Japan in July, including the 10th round of intensive talks between Japan's chief negotiator Ryosei Akazawa and Trump's trade team.

The Japanese government has been actively pushing for finalization of the agreement for weeks, with its top trade negotiator Ryosei Akazawa posting on social platform X to honor Tokyo legislators for concluding the lengthy negotiations, stating that Japan welcomes this executive order as "steadily implementing the agreement reached on July 22."

Masahiro Yamaguchi, Chief Market Analyst at Sumitomo Mitsui Trust Bank, noted that investors breathed a sigh of relief after Trump signed the executive order, as there had been concerns that Trump might backtrack on previous commitments.

Masahiro Yamaguchi, chief market analyst at SMBC Trust Bank, said relief spread among investors after Trump signed the order, as there had been concerns that Trump might renege on his earlier commitment.

"Now that the 15% rate is confirmed, companies can produce more accurate earnings outlooks," Yamaguchi said, adding that the market's earnings per share forecast for this year could be improved somewhat for the sector.

However, the American Automotive Policy Council, representing Detroit's Big Three automakers, expressed strong dissatisfaction, arguing that the 15% tariff on Japanese imported vehicles is significantly lower than the 25% rate for Canada and Mexico, which would allow vehicles manufactured in Japan with fewer U.S. components to enjoy lower tariff treatment, creating unfavorable conditions for U.S. industry and workers.