Name: What the US-Japan trade deal means for the world economy | DW News
Uploaded: 2025-07-23T17:41:44.000Z
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In Japan, the Prime Minister has denied reports that he was considering stepping down after his governing party suffered a bruising defeat.

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Shigeru Shiba says he will remain in office to oversee the implementation of a newly minted US-Japan tariff deal.

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The new deal with the Trump administration will see Japanese products like cars and electronics charged a levy of 15 instead of the current 25.

Shares at the Tokyo Stock Exchange surged after the deal was announced.

Japan will invest massively in the US in return for slashing tariffs on Japanese cars.

Japan's Nikkei index surged on the news to a one-year high, with major car brands, Toyota, Honda and Mazda leading the charge.

No wonder, auto exports make up almost a third of all Japanese exports to the US.

We are the first country in the world to reduce tariffs on cars and car parts, with no limits on volume.

We worked on it long and hard and it's a great deal for everybody.

I always say it has to be great for everybody, it's a great deal.

A lot different from the deals in the past, I can tell you that.

Japan will invest 550 billion dollars into the US and open its market to goods like cars, trucks, rice and other agricultural products.

Analysts say it's a win for US farmers, but the deal is unlikely to be a big boost in sales for US vehicle manufacturers.

I don't think that Japan's import of US cars will increase significantly from this.

You know, the tariff rate on automobiles in Japan is zero and has been zero for like three decades.

So, there must be some structural thing which prohibits US cars to sell well in Japan.

Either it's a body size or fuel efficiency, but in a word, I don't expect US cars to increase shares in Japan.

In Tokyo, newspaper front pages praise the coup, Japan being the beneficiary of the first major trade deal with the US.

Talks with even larger US trading partners like China, the European Union and Mexico are still on-going.

And I have Kate Ferguson with me here from DW Business.

Kate, from a Japanese perspective, is that a good deal for them?

Japan is the largest economy to have reached a trade agreement with the United States since Trump launched his tariff war back in April.

And it's especially good news for Japanese car makers.

They are able to swallow this 15% tariff, especially because unlike the deal agreed with the United Kingdom, there's no limit on the number of vehicles that can be imported at this rate.

A lot has also been made of this Japanese investment in the United States, half a trillion dollars going into strategic areas like AI and semiconductors, as well as a liquefied natural gas project in Alaska.

But I think it's important to add some context here.

Japan is already the biggest source of foreign direct investment in the United States.

It spent over $800 billion there last year.

And it's unclear whether the figure we're hearing today represents new spending or if it's simply repackaging existing commitments.

OK, that's important, of course, to figure out.

No, they're not happy because they feel that they're now essentially being treated worse than their Japanese counterparts.

And that's because they are currently paying a 25% levy on foreign parts.

And if you consider how complicated supply chains are, there's no vehicle in the United States that's 100% American made.

So from their perspective, the likes of Nissan and Honda and Toyota are now being treated better than they are.

And this was really reflected in the stocks, as we saw in the report there.

Japanese car makers surged on this news and European car stocks were also up on the hope that maybe the European Union could reach a similar deal with the United States.

Talking about the European Union, there's also talks going on about tariffs for the  Is there a chance for the EU to reach a similar deal before the August 1st deadline?

And interestingly, actually, today, EU Commission President Ursula von der Leyen met with the Japanese Prime Minister, Shigeru Shiba.

And it's likely that she was asking the Japanese side for some last minute negotiation tips, because there is a lot at stake here for the EU.

Trump is threatening a 30% tariff if no deal is reached before August 1st.

And the EU has actually been talking tougher in the last few days.

It's threatened to use what's called an anti-coercion instrument.

Essentially, it would allow them to target U.S. digital services.

The next few days are going to be really critical.

Thank you very much, Kate Ferguson, DW Business.