President Donald Trump reached a trade deal with Japan, which will impose a 15% tariff on products imported from Japan to the United States, including the automotive industry, while setting up a $550 billion fund supported by Japan for investment in the United States.
Trump held a 75-minute final meeting with Japan’s chief trade negotiator in the Oval Office on Tuesday and made a breakthrough, touting the deal. The agreement spared the key ally from a 25% tariff threat that was set to take effect next week.
Trump said at an event at the White House on Tuesday night: “They sent their top people here. We have made long and arduous efforts for this. It’s a very good deal for everyone.”
According to a senior US government official who declined to be named, under the agreement, Japanese automobiles and auto parts will be subject to a 15% tariff rate, the same as other Japanese exports. In return, Japan will accept cars and trucks produced in compliance with US motor vehicle safety standards without additional requirements – a potentially significant step towards selling more American-made vehicles in the country.
The core of the deal reached with Japan is a $550 billion commitment, the official said, which is similar to a sovereign wealth fund through which Trump himself could direct investment within the United States.
The final terms of the agreement still need to be clarified in an official announcement. The official said that the legal details and other details surrounding the $550 billion investment commitment are still being finalized.
The investment schedule is still uncertain, and it is not clear whether Trump will be able to allocate all the funds during his term.
The source of Japanese funds has not been disclosed yet. Japanese Prime Minister Ishiba Shigeru said that the total investment will amount to as much as 550 billion US dollars, and part of the funds will be provided in the form of loan guarantees.
The official said that after eight rounds of negotiations, Trump played the role of a “terminator”. In the last Oval Office meeting with Japan’s chief trade negotiator, Ryoichi Akasaka, he urged the other side to make more concessions and secure more favorable terms for the United States. US Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bennett also participated in the final negotiations.
Previously, it was said that US and Japanese officials were discussing the establishment of a fund of about 400 billion US dollars, with profits to be shared equally. But according to the terms finalized at the Oval Office meeting, Japan agreed to provide 550 billion US dollars for investment in US projects that Trump deems important, and through some investment tools, 90% of the profits will be returned to the United States.
A photo shared by Trump’s aide Dan Scavino on social media shows that the initial figure was $400 billion, but it seems to have been crossed out by Trump, who handwrote $500 billion instead. The final figure was determined to be $550 billion.
The official presented a hypothetical scenario regarding investment operations. For instance, the president could opt for a semiconductor manufacturing project, which could be constructed with Japanese funds and then leased to an operating company, with the resulting lease profits split 90% to the United States and 10% to Japan.
The senior official said that Japan also agreed to purchase 100 aircraft from Boeing, increase its rice purchase by 75%, and buy agricultural and other products worth 8 billion US dollars. At the same time, it will raise its defense spending with US companies from 14 billion US dollars to 17 billion US dollars annually.
The official said that Japan will also participate in a liquefied natural gas pipeline project in Alaska, which apparently refers to a long-delayed $44 billion project aimed at exporting the state’s natural gas to the world. Trump told lawmakers at the White House Tuesday night that Japan is “forming a joint venture” for the proposed Alaska liquefied natural gas project. Trump said, “They are all ready to make a deal now.”
Shigeru Ishiba said in Tokyo: “Japan and the United States have been in close negotiations, which concern the national interests of both countries. The two countries will continue to cooperate to create job opportunities and high-quality products.”
According to the Mainichi Shimbun on Wednesday, Ishiba has disclosed his decision to his close aides. Jiji Press also quoted a senior ruling party official as saying that Ishiba will step down in August. Not long before that, the United States and Japan announced an agreement to reduce the US auto tax and comprehensive tariffs on Japan to 15%.
