Toyota Motor Corp. vehicles bound for shipment at the Port of Nagoya in Tokai, Aichi Prefecture, Japan, on April 29, 2025. Photographer: Toru Hanai/Bloomberg.
U.S. industries and protectionists are raising alarms over President Donald Trump’s pact with Japan, saying it risks undercutting his stated goals of rebalancing America’s trading relationships and reviving domestic manufacturing.
Yesterday, Trump and his top negotiators hailed the deal as a potential model for other countries hoping to win tariff concessions, citing Tokyo’s pledge to create a $550 billion fund for investments in the United States. The president’s decision to grant Japan relief on automobiles, however, provoked criticism that the agreement wouldn’t address the main source of the U.S.’s trade deficit with Japan, and that it disadvantages Detroit’s Big Three automakers. Around 80 percent of the U.S.–Japan trade gap is in cars and car parts.
The reaction underscores the risks of the president’s transactional negotiating style. Industries that have championed much of Trump’s trade strategy and stand to benefit from robust levies on foreign rivals could be left in the lurch as his plans shift. “Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than it does North American–built vehicles with high U.S. content is a bad deal for the U.S. industry and U.S. auto workers,” said Matt Blunt, president of the American Automotive Policy Council, which represents Ford Motor Co., General Motors Co., and Stellantis NV.
Trump defended his approach, which resulted in a deal to reduce Japan’s country-specific import tax rate to 15 percent, including on cars and auto parts. This rate is lower than the 25 percent global tariff on vehicles. “I WILL ONLY LOWER TARIFFS IF A COUNTRY AGREES TO OPEN ITS MARKET. IF NOT, MUCH HIGHER TARIFFS! Japan’s Markets are now OPEN (for first time ever!). USA BUSINESSES WILL BOOM!” Trump posted.
His Commerce Secretary, Howard Lutnick, on Thursday called gripes from U.S. automakers “silly” and said that manufacturing executives he spoke to “are cool with it.” “When your competitor goes from 25 percent against them to 15 percent against them, I guess you’re a little bummed out. But come on, there’s no tariff if you build it in America,” Lutnick said on CNBC.
Lutnick argued in a Bloomberg Television interview on Wednesday that the deal was also ratcheting up pressure on South Korea and Europe to make additional concessions or risk their automakers being left at a significant disadvantage. And White House Press Secretary Karoline Leavitt said Trump’s approach is breaking down barriers for U.S. products abroad. “Thanks to President Trump, these countries around the world are agreeing to open their markets to American-made products and goods for the first time, which will lead to a boom in sales and profits for American businesses right here at home,” she told reporters yesterday.
Even so, Tuesday’s announcement marked the latest signal that Trump is willing to negotiate industry-specific duties on products including semiconductors and pharmaceuticals, potentially undermining the most durable pillar of his tariff strategy. As a result, automakers and other industry stakeholders are crying foul. They warn that reducing the taxes on Japanese auto imports reduces the effectiveness of tariffs not just for cars, but also for metals, semiconductors, and other goods.
“Unlimited imports at tariff rates below existing Section 232 rates critically undermine” the intention of the law and could actually encourage offshoring, said Jon Toomey, executive director of the Coalition for a Prosperous America, an advocacy group representing import-threatened industries that supports tighter trade controls. Industry-specific tariffs imposed under Section 232 of the Trade Expansion Act are seen as a more lasting tool than Trump’s country-based tariffs for boosting the competitiveness of U.S.–made goods, since they rest on stronger legal footing, and some have endured across multiple presidencies. Industry groups say the product-specific rates provide certainty needed to drive investment in domestic manufacturing plants.
The provision allowing unlimited numbers of Japanese autos to be imported at a tariff rate of 15 percent is far more expansive than the steel and aluminum tariff reduction Trump gave the UK, which allows only a limited quota of imports to enter the United States at a reduced rate. Now other countries already are clamoring for sectoral tariff relief, and the U.S.–Japan trade deal sends a signal that Section 232 tariffs are up for negotiation, people familiar with the matter said. Two of those individuals predicted the agreement with Japan will also add leverage to the auto and oil industries’ pleas for relief from steel duties.
“It doesn’t make sense to allow for unlimited vehicle imports at 15 percent while charging rates of 25 percent on auto parts and 50 percent on steel,” Toomey added.
It’s also unclear how and when the $550 billion Japanese investment fund might come to pass—or whether it will prove to be as illusory as investment pledges Trump secured during his first term from China in exchange for scaling down tariffs. Although Beijing promised in 2020 to buy $200 billion in additional U.S. agricultural commodities and other goods, ultimately only 58 percent of those purchases materialized amid the pandemic, according to the Peterson Institute for International Economics.
Trump administration officials cast the Japan deal, as well as frameworks with Indonesia and the Philippines, as incentive for other major partners, including the European Union and South Korea, to bring their best investment and purchasing pledges to the table. “It spurs other deals along,” White House trade adviser Peter Navarro said in a Bloomberg Television interview.
Treasury Secretary Scott Bessent made clear the investment plan helped Japan secure its tariff reduction, telling Bloomberg Television: “They got the 15 percent rate because they were willing to provide this innovative financing mechanism.” Lutnick said on the network that under the arrangement Japan will serve as a financier providing equity, loans, and other support for manufacturing plants, infrastructure, and other projects in the United States.
Other countries will be under pressure to follow the investment model, said a senior administration official who asked for anonymity because details haven’t been formally announced. The investment deals could prove especially attractive to Trump, who has frequently extolled planned spending in the U.S. announced since his January inauguration. The president and top administration officials also regularly tout the surge in revenue from new tariffs, which have already brought in $113 billion this year, according to the Treasury Department.
The U.S.–Japan deal’s emphasis on investment suggests that the promise of more revenues has taken priority over the push to protect domestic industries, one person familiar with the matter said.
While direct foreign investment in the United States could help expand domestic manufacturing and artificial intelligence capacity, it won’t necessarily make the country’s exports more competitive on its own. And some analysts raised doubts about whether Japan’s promises to open its markets to U.S. products will prove meaningful.
The administration cast Japan’s concession to accept cars made to U.S. federal motor vehicle safety standards, instead of subjecting them to additional regulatory requirements, as a boon for Detroit. Even so, a major impediment to U.S. auto sales in Japan is the American designs themselves—not just trade barriers. Put simply, Japanese consumers are less interested in driving Fords and GMs than Americans are in Toyotas and Hondas. Japan sells the U.S. about 84 cars for every one vehicle the US sells in Japan.
“American cars that are big just don’t comport well with the needs, desires, and demands of the Japanese public,” said Colin Grabow, an associate director at the Cato Institute’s trade policy center. “It’s unclear what the payoff here is.”
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