US and Japan: Historic Trade Deal

Recently, a trade deal was signed between US President Donald Trump and Japan’s Prime Minister Shigeru Ishiba, which Trump described as the "largest trade agreement in history." Although this statement is debatable, the agreement is expected to be an important turning point for the global economy, especially for Asian countries.

Economic opportunities for Japan
Japan is the world’s fourth-largest economy, with exports mainly in automobiles, electronics, and machinery. The US is its largest export market. Previously, high tariffs imposed by the Trump administration could have negatively affected Japan’s economy. The new agreement lowers tariffs, provides stability for businesses, and expands manufacturers’ ability to plan.

Especially, Japan’s automotive industry—giant companies like Toyota, Honda, and Nissan—is expected to benefit greatly. Previously, Japanese cars imported into the US faced a 27.5% tariff. Now this rate is reduced to 15%, potentially making Japanese cars cheaper compared to competitors.

Large investments and jobs in the US
In exchange for reduced tariffs, Japan announced it will invest $550 billion in the US. These funds will be directed towards creating resilient supply chains in critical sectors such as pharmaceuticals and semiconductors. The agreement is expected to create jobs and foster innovation in the US.

Additionally, Japan agreed to increase rice purchases from the US, which will strengthen food supply in Japan.

Regional and global pressures increase
This agreement may also influence negotiations with countries like South Korea and Taiwan. Some Asian countries—Vietnam, Indonesia, and the Philippines—have already announced new deals with the US.

However, poorer countries like Cambodia, Laos, and Sri Lanka, whose economies rely on exports, cannot offer significant proposals to the US and thus may be left out.

Furthermore, the European Union announced it will strengthen cooperation with Japan to "counter unfair trade practices and economic coercion." This could lead to intensified competition in the global trade arena.

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