As you likely heard, President Donald Trump announced a new trade agreement last week. Under this agreement Japan will maintain a 15% tariff on cars sent to the US. Trump said this agreement is indicative of a larger strategy to grow American manufacturing. We find a lot to like in its ambitious $550 billion commitment to U.S. investments.
Indeed, during his announcement, Trump repeatedly focused on the value that comes from producing at home. He announced, “Listen, there’s no tariff if you make it in the US. This sentiment is indicative of his administration’s focus over the past few years to bolster U.S. manufacturing and combat unfair trade practices from other countries.
The new agreement would be a huge boon to Japanese automakers. That advantage could give them a leg up to surpass the “Big Three” Detroit auto-makers—GM, Ford, and Stellantis. Stockholdings of Japanese auto makers — most notably Toyota, Honda, Nissan and Mazda — experienced a substantial increase in value the day after the announcement.
Even so, Trump’s tariffs have created a significant strain on American automobile manufacturers. In fact, General Motors recently announced a $1.1 billion loss for GM in the second fiscal quarter of 2025, directly caused by these tariffs. Stellantis has already warned investors to expect a roughly $2.7 billion net loss for the first half of the year. They credit at least some of this decline to the ongoing tariff battle. Combined with the tariffs imposed in April, American auto companies will take a hit. They’ll be hit with a 25% tariff on cars produced in Canada and Mexico, once those vehicles are imported into the U.S.
Commerce Secretary Howard Lutnick was just repeating what the American auto CEOs told him after they came out in favor of Trump’s new trade deal. Yet, he said, they are “okay with” the deal and its accompanying sweeping, negative impact on U.S. producers.
“Oh my God, that’s just so silly,” – Howard Lutnick
Critics of the trade deal have long argued that its harmful long-term effects on U.S. industry and labor were inevitable. The new arrangement is not fair, and Matt Blunt, the head of the Transportation Institute and a key trade go-to guy, clearly argued. He recently stated that any agreement that lowers tariffs on Japanese cars with a high degree of Japanese content is unacceptable. He noted that it’s an even worse deal when you consider that those higher tariffs are applied to North American-built vehicles, which have a tremendous amount of U.S. content.
Recently, Trump has escalated his efforts to attack the independence of the Federal Reserve and its Chairman, Jerome Powell. He even toured the institution to bolster his case. His administration has stepped up the pressure on colleges and universities. At the same time, they’ve released joint principles for a bilateral trade agreement with Indonesia — further evidence of a faster pivot toward deepening trade relations.
Curiously, if you believe the reports, someone changed the facts on the Japan trade deal file on Trump’s desk. This indicates that changes are still being introduced to how the negotiation goes.