On Thursday, President Trump signed an executive order officially reducing the import tariff on Japanese cars from 27.5% to 15%, in accordance with the U.S.-Japan trade agreement reached in July. Following the announcement, both the Nikkei 225 and Topix indices in Japan saw gains in trading on Friday, leading to a general uptrend in the Asia-Pacific stock markets.
According to the details of the executive order and the agreement, the Japanese government will invest $550 billion in the United States, with investment targets selected by the U.S. side.
In addition, Japan has committed to increasing its purchases of U.S. rice by 75%, as well as importing more corn, soybeans, fertilizers, and bioethanol, totaling around $8 billion in agricultural product purchases annually.
As part of the agreement, the White House announced in July that Japan will purchase 100 Boeing aircraft and increase defense procurement from U.S. companies from $14 billion to $17 billion per year.
The executive order stipulates that some tariff reductions can be backdated to August 7, and will be fully effective seven days after the order is announced. Specifically for car tariffs, the executive order eliminates previously imposed additional tariffs, bringing the import tax rate on Japanese cars down to 15%.
Furthermore, aerospace products (excluding drones) will have zero tariffs restored, while generic drugs and their raw materials and chemical precursors will also be reduced to zero tariffs. Natural resources that are not naturally found or in insufficient quantities within the U.S. may also be exempt from tariffs, with specific items determined by the U.S. Department of Commerce.
Following months of difficult negotiations, Japan’s chief negotiator, Ryo Akasawa, briefly wrote on the social platform X, “Finally.”
Toyota Motor Corporation stated in a press release, “While nearly 80% of Toyota vehicles sold in the U.S. are produced in North America, this framework provides the clarity we urgently need.”
Analysts also believe that the agreement has alleviated pressure on the automotive industry.
Phillip Wool, Head of Portfolio Management at Rayliant Global Advisors, stated, “The agreement ultimately confirms a maximum tax rate of 15%, essentially removing the last risk. In this scenario, this should be seen as good news for the automotive industry, which has borne the heaviest tariff risks.”
According to U.S. government data, the total bilateral trade between the U.S. and Japan in 2024 was close to $230 billion, with Japan having a trade surplus of around $70 billion with the U.S.
Japan emphasized that while the agreement expands U.S. agricultural imports, it “does not sacrifice” Japanese agriculture. The agreement also ensures that Japan enjoys the lowest tariff treatment in chips and pharmaceuticals negotiated by the U.S., with commercial aircraft and components exempt from tariffs.
In comparison, while the EU reached a 15% benchmark tariff framework with the U.S. in July, avoiding a new round of tariffs on chips and pharmaceuticals, European car exports to the U.S. still face a high tariff of 27.5%.
Following the announcement, the Japanese stock market surged, with the Nikkei 225 index rising by around 1.4% at one point, and the Topix index by 0.8%, with Toyota shares leading the gains with a 1.6% increase, making the largest contribution to the overall market.
In other Asia-Pacific markets, the South Korean KOSPI index rose by 0.26%, KOSDAQ by 0.35%, and the Australian S&P/ASX 200 index by 0.58%.
The Taiwan Weighted Stock Price Index also rallied, currently standing at 24,392.83 points, up by 212.98 points, an increase of 0.88%.
The U.S. stock market also closed higher on Thursday, with the Dow Jones Industrial Average rising by 0.77%, the S&P 500 by 0.83%, hitting a new closing high for the 21st time this year, and the Nasdaq index by 0.98%.