US President Donald Trump says he has completed a 'massive deal' with Japan
|US President Donald Trump said early Wednesday that the United States (US) has a trade deal with Japan. Trump further stated that he just completed a massive deal with Japan, perhaps the largest deal ever made.
Meanwhile, Japan's top trade negotiator Ryosei Akazawa posted on Twitter, saying, “Mission Complete.”
Key quotes
Japan will invest $550 billion into the United States.
Japan will pay reciprocal tariffs to the United States of 15%.
Japan will open their country to trade including cars and trucks, rice and certain other agricultural products, and other things.“
An official of the Trump administration later provided some details of the US-Japan trade deal.
Key takeaways
Japan will increase purchases of agricultural products such as rice.
There are no changes to other current sectoral tariffs in the US-Japan deal.
US tariffs on Japanese autos and auto parts will total 15%.
Market reaction
At the press time, the USD/JPY pair is up 0.17% on the day to trade at 146.88.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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