Japan-U.S. Tariff Agreement: Collaborative Projects Should be Steadily Promoted

Editorial

16:12 JST, July 30, 2025

The tariff negotiations between Japan and the United States have been settled, and the focus will now shift to managing the progress of implementing the agreement. Japan needs to urgently realize signature projects through fresh industrial collaboration with the United States.

According to the agreement between the two governments, the “reciprocal tariff” will be reduced from the originally planned 25% to 15%. Additional tariffs on automobiles will also be halved from 25% to 12.5%, bringing the total to 15% when combined with the basic tariff of 2.5%.

Japan and the United States did not draft a general joint document for this agreement, and they reportedly have no plans to do so going forward. This decision was likely made because both countries wished to explain the agreement to their own people in a manner convenient to them.

However, for Japan, concerns remain as there is no clear guarantee that tariff rates will be reduced.

The Japanese government reportedly envisions Aug. 1 as the date the agreed tariff rates will take effect. It should strongly demand that the U.S. side issue an executive order that will take effect at an early stage to implement the reduction to 15%.

The European Union has also reached an agreement with the United States under a similar framework. It is important for the Japanese government to work with the EU to urge Washington to implement the agreements.

There are also noticeable discrepancies regarding Japan’s $550 billion (about ¥80 trillion) investment in the United States, which was welcomed by U.S. President Donald Trump.

According to the announcement by the Japanese side, government-affiliated financial institutions will provide funds and loans, and Japan’s understanding is that it has outlined a broad framework of financial support. However, the U.S. announcement states that Japan will invest that amount at the direction of the United States.

U.S. Treasury Secretary Scott Bessent has said that he will assess Japan’s implementation of the agreement quarterly, and if the implementation is insufficient, Washington will revert the tariff rates to 25%. If differences in perception surface in the future, it could become a cause of conflict between Japan and the United States.

The key to the steady implementation of the agreement is the materialization of the investment in the United States. It is hoped that Japan will quickly formulate signature projects.

At the end of 2024, Japan’s balance of direct investment in the United States amounted to about $820 billion, the highest among all countries for the sixth consecutive year. Japanese companies should be highly motivated to invest.

The nine fields that are the targets for close collaboration include semiconductors, iron and steel, shipbuilding, critical minerals, energy and automobiles. From an economic security perspective, it will be important to advance the development of supply chains in these fields with China in mind.

While Japan has avoided the devastating impact of even higher tariffs, a 15% tariff still imposes a significant burden on Japanese companies. More than a few small and midsize enterprises are finding it difficult to pass the tariff costs along to export prices even if they want to do so. The hope is that the Japanese government will also soundly implement measures to support their immediate cash flow.

(From The Yomiuri Shimbun, July 30, 2025)