HISTORIC TRADE AGREEMENT BETWEEN THE U.S. AND JAPAN
The White House announced a trade agreement with Japan. It establishes reciprocal tariffs, expands U.S. export access, and secures Japanese investment in U.S. manufacturing and infrastructure. The agreement applies a 15% tariff on most Japanese imports, increases Japan’s purchases of U.S. agriculture and energy products, and includes a $550 billion Japanese investment commitment in U.S. industrial projects.
According to the Executive Order, the agreement is intended to reduce the U.S. trade deficit, strengthen the manufacturing and defense industrial base, and address national security threats identified in prior Section 232 proclamations.
WHAT ARE THE KEY FEATURES OF THE U.S.–JAPAN TRADE AGREEMENT?
The agreement establishes a tariff framework that applies a baseline 15 percent duty on nearly all Japanese imports.
Specific provisions include:
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A 15% tariff applied to Japanese imports where existing HTSUS duty rates are below that threshold
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Continuation of higher rates where duty levels already meet or exceed 15%
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Retroactive tariff application to goods entered on or after August 7, 2025
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Sector-specific tariff treatment for automobiles and auto parts, aerospace products, generic pharmaceuticals, and natural resources unavailable in the United States
These measures replace earlier duties imposed under Executive Order 14257 and align tariff policy with the updated bilateral framework.
HOW WILL JAPAN EXPAND MARKET ACCESS FOR U.S. EXPORTS?
Japan has committed to expanding imports of U.S. goods across multiple industries.
The White House Fact Sheet identifies the following:
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$8 billion annually in agricultural imports, including corn, soybeans, fertilizers, and bioethanol for sustainable aviation fuel
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A 75% increase in rice purchases under Japan’s Minimum Access scheme
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$7 billion annually in U.S. energy imports, including liquefied natural gas
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Recognition of U.S. automotive safety standards, eliminating additional testing requirements for American cars and trucks
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Clean Energy Vehicle subsidies applied to U.S.-made cars
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Purchases of U.S.-produced commercial aircraft and defense equipment
These measures are intended to lower barriers and create expanded opportunities for U.S. exporters.
WHAT IS THE SIGNIFICANCE OF JAPAN’S INVESTMENT COMMITMENT?
Japan has pledged $550 billion in investment across U.S. industries, with projects to be selected by the U.S. government. Priority sectors including semiconductors, pharmaceuticals, metals, critical minerals, shipbuilding, energy infrastructure, and advanced technologies such as artificial intelligence and quantum computing.
These investments are expected to expand domestic industrial capacity and support U.S. supply chain resilience.
HOW ARE AUTOMOBILES AND AEROSPACE PRODUCTS ADDRESSED?
The agreement modifies tariff treatment in two strategic sectors:
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Automobiles and auto parts: Products of Japan are subject to the 15 percent tariff framework, replacing earlier Section 232 duties imposed in March 2025.
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Aerospace products: Tariffs previously applied under multiple proclamations are removed for Japanese civil aircraft and aerospace goods covered by the WTO Agreement on Trade in Civil Aircraft, excluding unmanned aircraft.
WHICH PRODUCTS ARE EXEMPT FROM RECIPROCAL TARIFFS?
To ensure continued access to essential goods, exemptions apply to:
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Natural resources unavailable or insufficiently produced in the United States
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Generic pharmaceuticals
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Generic pharmaceutical ingredients and chemical precursors
This exemption structure safeguards health and industrial supply needs while maintaining the principle of reciprocity.
WHAT COMES NEXT FOR IMPORTERS AND EXPORTERS?
The agreement is effective retroactively as of August 7, 2025. Importers may request refunds for duties previously paid, with U.S. Customs and Border Protection administering claims under existing procedures.
The Department of Commerce and CBP will publish Harmonized Tariff Schedule modifications in the Federal Register. Importers and exporters are advised to monitor these updates for implementation details, including tariff administration and certificate of origin requirements.
The Executive Order authorizes continued monitoring of Japan’s commitments. Should Japan fail to implement agreed measures, tariff terms may be modified to protect U.S. economic and security interests.
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