On September 4, 2025, a handshake in Washington, D.C. between U.S. Commerce Secretary Howard William Lutnick and Japan’s Minister for Economic Revitalization Ryosei Akazawa signified more than just diplomatic formality—it marked the official implementation of a sweeping trade deal between the United States and Japan. The agreement, months in the making and fraught with negotiation hurdles, now stands to reshape economic relations between the two allies, while stirring political waters in Tokyo and casting ripples across global markets.
According to The Sankei Shimbun, U.S. President Donald Trump signed an executive order to put the deal into effect, applying a baseline 15% tariff on nearly all Japanese imports, including automobiles and parts. This move follows a July 2025 agreement that, while celebrated at the time, left many details unresolved and stakeholders on both sides anxious about the specifics. The order not only clarifies the terms but also retroactively applies tariff relief to Japanese goods imported after August 7, 2025. Notably, the reduction in automobile tariffs—from a steep 27.5% to 15%—will take effect within two weeks of the signing, with relief for autos set to begin seven days after the executive order.
For Japanese businesses, especially automakers, the stakes are high. Bloomberg reports that Toyota, Japan’s automotive titan, warned in August that Trump’s tariffs could result in a nearly $10 billion blow to its bottom line, forcing a 16% cut in its full-year operating profit forecast. U.S. rivals aren’t immune either: Ford and General Motors project pre-tax adjusted profit hits of $3 billion and $4–5 billion, respectively, for 2025. The auto sector’s interconnectedness means that tariffs reverberate far beyond the factory floor, affecting suppliers, workers, and consumers in both countries.
But the deal is more than just tariffs. Tokyo agreed to invest a staggering $550 billion in projects selected by the U.S. government. This investment, formalized in a memorandum of understanding, will be directed by an “Investment Committee” chaired by the U.S. side, raising questions in Japan about how much say Tokyo will actually have in the process. As The Sankei Shimbun editorial board pointedly asked, “Doesn't it look like Japan will be unable to refuse the choices made and thus forced to take on unprofitable projects?” The investment targets, while potentially lucrative, are ultimately chosen by the U.S. president based on committee recommendations, leaving Japan in a position where its economic agency could be constrained.
In addition to investment, the agreement commits Japan to ramp up its purchases of American agricultural products—corn, soybeans, and notably, a 75% increase in imports of U.S. rice within the minimum access quota. The deal also includes the purchase of 100 Boeing planes and $8 billion worth of agricultural and crop products. U.S.-made commercial aircraft and defense equipment are set to become more common in Japanese procurement, further deepening the economic ties between the two nations. According to the executive order, Japan will offer "breakthrough openings in market access" in manufacturing, aerospace, agriculture, and the automobile sectors, promising new opportunities for American exporters.
Despite the fanfare around the signing, the road to this agreement was anything but smooth. Negotiators, in their rush to reach a consensus, avoided finalizing many details in writing—a decision some analysts attribute to the strategy of Japanese Prime Minister Shigeru Ishiba’s administration. This lack of specificity led to months of uncertainty, as both sides haggled over implementation and the timetable for tariff reductions. As The Sankei Shimbun noted, “Questions remain about why it took so long, despite Japan's request for it to be expedited.” The signing of the executive order was described as “long overdue,” with Japanese officials reportedly frustrated by the delays.
Political dynamics in Japan have only added to the tension. Prime Minister Ishiba faces mounting pressure at home, following the ruling Liberal Democratic Party’s loss of seats in the upper house election in July 2025. A long-awaited party report blamed the defeat on lackluster measures to curb inflation, previous political scandals, and weak mobilization of young voters. Key party members have signaled intentions to resign, and Ishiba, while vowing to stay on, is the subject of growing calls for a change in leadership. According to analysts at Eurasia Group, Ishiba is “unlikely to survive a challenge from within the party next Monday,” with a 60% chance of defeat in a leadership vote scheduled for September 15. The report notes that “Ishiba's poor performance as party leader in lower and upper house elections and events in recent days, including former prime minister Aso Taro announcing his support for the special election, have turned the tide against Ishiba.”
Meanwhile, the agreement’s implementation is being closely watched for its potential impact on Japan’s economy. While the reduction in economic uncertainty is welcomed by Japanese companies, the reality is that exports to the U.S. are still subject to significantly higher tariffs than before. Concerns abound that these tariffs could depress Japan’s gross domestic product and hit small and medium-sized enterprises that form the backbone of the country’s supply chain. As The Sankei Shimbun editorial put it, “The government should take all possible measures to prevent this from detrimentally affecting employment or the reconsideration of planned wage hikes.”
The U.S. side retains the power to “monitor” Japan’s compliance with the deal and, if it deems Japan to be falling short, to unilaterally raise tariffs again. This provision has not gone unnoticed in Tokyo, where memories linger of President Trump’s past criticisms—sometimes, as Japanese officials note, for reasons “contrary to the facts.” The specter of further unilateral action hangs over the agreement, prompting vigilance from Japanese policymakers and business leaders alike.
In an effort to maintain goodwill, Japan’s top trade negotiator, Ryosei Akazawa, delivered a letter from Prime Minister Ishiba inviting President Trump to visit Japan. The gesture underscores the delicate balancing act Tokyo must perform: strengthening ties with its most important ally while safeguarding its own economic interests and political stability.
As the dust settles from the signing ceremony, both governments are touting the agreement as a win for their respective economies. But beneath the surface, questions remain about the long-term effects of the deal, the durability of the political leadership in Tokyo, and the broader implications for international trade at a time when protectionism and economic nationalism are on the rise. For now, the Japan-U.S. trade agreement stands as a testament to the complexity—and the necessity—of negotiation in a world where economic and political fortunes are more intertwined than ever.
