U.S.-Japan Trade Pact Takes Effect with 15% Tariffs as Political Pressures Mount in Tokyo

On September 5, U.S. President Donald Trump signed an executive order to enforce a bilateral trade agreement with Japan, introducing a 15% baseline tariff on most Japanese imports, including automobiles — a cornerstone of Japan’s export economy.

Key Provisions of the Agreement

The trade deal, finalized in July after months of negotiations, sets out several major commitments:

Japan will invest $550 billion in U.S.-selected projects.

Tokyo has agreed to increase imports of U.S. agricultural products such as corn, soybeans, and rice, alongside purchases of Boeing aircraft and American defense equipment.

Expanded market access will be provided in manufacturing, aerospace, agriculture, and the automotive sector.

The executive order specifies that tariffs on autos and auto parts, as well as on aerospace products, pharmaceuticals, and natural resources, will also be set at 15%. Tariff adjustments for automobiles will take effect seven days after the order.

In addition, tariff relief will be applied retroactively to Japanese goods entering the U.S. market from August 7, 2025.

Impact on Businesses and Global Supply Chains

Trump’s global tariff campaign continues to disrupt international supply chains, with Japan’s auto industry bearing the brunt.

Toyota warned of potential losses reaching $10 billion as higher tariffs dent U.S. sales, forcing the company to slash its full-year operating profit forecast by 16%. Ford anticipates a $3 billion drop in pre-tax profit, while General Motors (GM) projects a $4–5 billion hit for the year.

Political Turbulence in Japan

The timing of the trade agreement coincides with mounting domestic political challenges for Japanese Prime Minister Shigeru Ishiba.

Earlier this week, the ruling Liberal Democratic Party (LDP) released a report on its poor performance in the July upper house election. The findings cited:

Limited appeal of government measures to curb inflation

Lingering effects of political scandals

Weak mobilization of younger voters

Japanese media reported that several senior LDP members have signaled intentions to resign, while Ishiba has insisted on staying in office despite calls for new leadership.

Analysts at Eurasia Group suggested Ishiba faces a 60% likelihood of defeat in an internal vote expected next week, which could bring forward the party’s leadership election. Some observers believe Ishiba may step down even before the vote as internal discontent grows.