Auto stocks soared on news the Trump administration reached a trade deal with Japan.
With 25% tariffs against several countries looming on August 1, President Trump announced Tuesday evening the U.S. had reached a trade deal with Japan that will ultimately lower import duties to 15%, while reinforcing Japanese investment in America. Under this new deal, Japan would also open up its country to more U.S. imports, including vehicles, rice and agricultural products, among other items.
The announcement comes as automakers scramble to respond to the ever-changing tariff situation. Some models have seen their imports or manufacturing paused, such as the Italian-built Dodge Hornet and Mercedes’ electric EQ models, while others have been dropped from the U.S. market entirely.
This deal aims to see Japan invest $550 billion into the United States. In return, the tariff against Japanese cars imported to the U.S. will comprise an existing 2.5% tariff, as well as an additional 12.5% duty, totaling 15%. As of the early morning July 23, Japanese Prime Minister Shigeru Ishiba told media that he awaited more details from his negotiating team (per a report by The New York Times).
Lower tariffs will be a boon to Japanese automakers, for which exports to the United States are a huge profit driver. In fact, upon the news Mazda’s stock surged 17.7% on the Tokyo Stock Exchange, while Toyota’s stock increased 14.3%, Honda increased 11.2% and Nissan went up 8.3%.
On the other hand, the American Automotive Policy Council raised concerns over the Trump administration’s decision, saying the trade deal drops tariffs below the 25% rate the Big Three have to face importing parts and vehicles from Canada and Mexico. “Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American-built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers,” said Matt Blunt, head of the American Automotive Policy Council. Trump threatened to raise import duties on Mexico to 30% and Canada to 35% if they don’t summarily reach a deal with the U.S. by the aforementioned August 1 deadline.
