Trump, Japan Strike Tariff Deal; Auto Stocks Jump

President Donald Trump achieved a major trade agreement with Japan through which the country reduced auto import tariffs while securing a $550 billion investment package to support U.S.-bound projects and supply chains. The agreement protects Tokyo from additional duties while simultaneously increasing American exports especially defense and aerospace products.

The agreement reduces Japanese vehicle tariffs entering the U.S. market to 15% from their current combined rate of 27.5%. The agreement lowers all Japanese goods subject to August 1 duties to a 15% tariff rate. The agreement requires Japan to acquire 100 Boeing aircraft while boosting its defense spending with U.S. firms to $17 billion annually from the current $14 billion.

The agreement features Japanese financial backing to support U.S. manufacturing activities in semiconductor and pharmaceutical sectors. A proposed business model includes Japan funding semiconductor plant construction which would then be leased to operators who would distribute most profits to the United States.

The market reacted positively to this announcement. The Nikkei stock market index increased by 4% as Toyota and Honda stocks rose 14% and 11% respectively. The Dow Jones index increased due to positive expectations regarding future trade agreements before the August 1 deadline.

The agreement received praise from Trump who called it the biggest trade deal Japan has ever signed while Ishiba described it as a historic agreement between allies.