President Donald Trump has declared that the United States has reached a major new trade agreement with Japan, describing it as “the largest trade deal in history.”

Under the deal, Japan will invest $550 billion (£407 billion) into the US economy. In return, Japanese goods entering the US will be taxed at a reduced rate of 15%, down from the 25% that Trump had previously threatened.

Announcing the agreement at a White House event on Tuesday, Trump stated:

“It’s a massive deal. We worked on it for a long time with Japan’s top officials. It’s great for both countries.”

According to Trump, Japan has also agreed to open its markets further to US exports—including automobiles, trucks, rice, and other agricultural products.

Japanese Prime Minister Shigeru Ishiba welcomed the deal, highlighting the 15% tariff rate as the lowest among countries with trade surpluses with the US. He also confirmed that US tariffs on Japanese vehicles and parts would be reduced from 25% to 15%.

However, this new rate is still above the temporary 10% tariff the US imposed between April and July during a pause in Trump’s “reciprocal tariffs” plan.

Japan’s automotive sector—responsible for nearly 3% of its economy—plays a key role in this agreement. In 2019, the country exported $410 billion (£300 billion) worth of vehicles to the US, according to the US International Trade Administration.

Prime Minister Ishiba added:

“We are the first to reduce tariffs on cars and auto parts with no quota limits.”

Despite the progress, Ishiba clarified that Japan will not reduce its tariffs on American imports. Meanwhile, UK-made cars enjoy a lower 10% tariff when entering the US, but that benefit is limited to a quota of 100,000 vehicles.

Not all US industries were pleased. American car manufacturers expressed concern that the deal favors Japan without offering similar tariff relief for imports from Canada and Mexico. Matt Blunt, president of the American Automotive Policy Council—representing Ford, General Motors, and Stellantis—criticized the agreement, calling it “a bad deal.”

In addition to Japan, the US also announced a new trade agreement with the Philippines. Philippine goods entering the US will now be taxed at 19%.

Economist Shigeto Nagai from Oxford Economics described Japan’s move to reduce its main tariff rate to 15% as a realistic compromise. He noted that Japan’s planned $550 billion investment would support US manufacturing and jobs—key themes in Trump’s economic agenda.

Earlier this month, Trump had warned Japan of a possible 25% tariff on its exports if a deal wasn’t reached by August 1. This followed his broader tariff threats issued during the so-called “Liberation Day” announcement on April 2, which were later paused for 90 days due to market instability. The delay gave negotiators from Tokyo and Washington time to finalize terms.

Japan remains the world’s fourth-largest economy, trailing only the US, China, and Germany. Following news of the agreement, Japan’s Nikkei 225 stock index rose over 3%, driven by strong performance in major carmakers like Toyota, Nissan, and Honda.

The full details of the deal have yet to be released, and the BBC has reached out to both the White House and the Japanese embassy in Washington for further information.