Unpredictable and Unprecedented: The Trump Tariff Policy and Japan’s Responses

Unpredictability on the Trade Front

In October 2025, US President Donald Trump went on a whirlwind tour of Asia. He attended the first day of the summit gathering of the Association of Southeast Asian Nations held in Malaysia on October 26–28 before flying to Tokyo, where he met with the newly installed Prime Minister Takaichi Sanae on October 28, and then to South Korea, where he met with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation leaders’ gathering on October 29. Japan had entered negotiations with the United States in April on the tariffs levied on its exports to that market, reaching an agreement of sorts in July. The Japanese side feared that this could be followed by further demands of Japan from the Trump administration, but late October meetings resulted in a joint statement reaffirming the steady implementation of the July agreement, bringing a measure of relief to Tokyo.

In 2019, during the first Trump administration, Japan dealt with an America that had left the Trans-Pacific Partnership and achieved the Japan-US Trade Agreement and the Japan-US Digital Trade Agreement. The former, in particular, benefited Japan by exempting rice from US agricultural exports with lower tariff rates. It also staved off US tariff hikes on key Japanese export categories like automobiles and auto parts. This time, though, Japan found itself in the same boat as all other US trade partners as it scrambled to address the second Trump administration’s unprecedented trade policy onslaught.

There are three aspects to the Trump White House’s trade strategy that make it stand out as unprecedented. First is its application of dramatically hiked tariff rates to imports from trade partners with a wide range of goals in mind—from national security to driving down trade deficits, protecting domestic industries, preventing inflows of illicit drugs, and more. And these tariffs have been applied through a two-level approach involving both “reciprocal” tariffs imposed via the 1977 International Emergency Economic Powers Act, which allows the president to regulate international commerce upon declaration of a national emergency, and additional 25% tariffs levied on specific import categories through Section 232 of the 1962 Trade Expansion Act, which similarly gives the president power to restrict imports if they “threaten to impair” national security.

The “reciprocal” tariffs conceived by the Trump administration apply a basic rate of 10% to all imports, with additional percentages applied to imports from a broad range of trade partners mainly based on calculations of American trade deficits with them. Further category-specific tariffs apply to steel and aluminum products, as well as autos and auto parts. All of these are unilateral measures running counter to the most-favored-nation principle implemented within the World Trade Organization framework, making it hard to deny that the United States has abandoned its leading role in the global free trade system.

Second, all of Trump’s trade policies have been rolled out via executive orders, rather than acts of the US Congress, and have frequently been altered soon after implementation at his discretion. This makes it extraordinarily difficult to predict the course that trade relations with the United States will take in the future. In April 2025 Trump announced his raft of punitive tariffs on the country’s trade partners, but these were soon put on pause for a period of 90 days, and then frozen even longer, until August. His administration often changed its demands, perhaps in an effort to advertise the results of its tariff policy to its domestic base. Jerked back and forth by the president’s social media posts signaling shifts in his stance, trading nations moved quickly to launch negotiations with the administration to reduce uncertainty in the trade sphere.

And third, Trump has clearly stated that he intends to apply high tariff rates to imports from all trade partners, even military allies and those that have signed free trade agreements with the United States. Different demands have been presented to each country, with a particular focus on national security issues and on trade deficits that Trump claims are due to unfair trade practices on the part of those partners. In this light, it is not surprising that trade with China, seen as a security threat to the United States, has come under the most scrutiny in this wave of trade policy pronouncements. The shocking development has been the Trump administration’s willingness to torpedo relationships of trust with Japan, the European Union, Canada, South Korea, and other allies by slapping high tariffs on their goods as well.

Murky Agreements

Japan was initially confronted with a 10% tariff on all products across the board, with an additional rate of 24% applied on top of that, along with a 27.5% rate on automotive imports. The Japanese government began its negotiations with the White House right away. It is true that Japan has a considerable trade surplus with the United States, the seventh largest of all America’s trade partners, but from 2019 onward it has also been the largest investor in the United States, particularly in the manufacturing sector; this investment continues to grow. Tokyo hammered on this point in negotiations, urging President Trump to look at the investment picture rather than reaching for the tariff tool and consistently stressing Japanese investment’s contributions to the economy and employment in the United States.

This paid off in July 2025 with the inking of a bilateral framework agreement applying a baseline tariff of 15% to nearly all Japanese imports, including autos and auto parts—a lower level than the rate first applied by the White House in April—while maintaining a previously hiked rate of 50% on steel and aluminum. This agreement also included a Japanese commitment to invest $550 billion in the United States, to increase rice imports from American farmers, to boost annual purchases of US energy resources like liquified natural gas by $7 billion, and to purchase several billion dollars’ worth of defense-related products and semiconductors each year.

There was no detailed document spelling out the finer points of this agreement, producing concerns that the two sides would interpret it in different ways. In particular, the American fact sheet and Japanese overview published in July to present the outline of the framework agreement were at odds on various points. The Japanese document described the $550 billion to be invested in the United States as the total of investment, loans, and loan guarantees by financial institutions affiliated with the Japanese government, while the US document stated that President Trump would be directing the investment into strategic sectors in order to rebuild and expand US industry.

It was in September that the framework agreement was finalized with another executive order, and work began in earnest on hammering out the details. This reduced some of the uncertainty, but in its latest form the agreement now also included a warning that the United States could raise its tariff rates again if Japan were found to be in violation of the terms. In October, on the occasion of President Trump’s summit meeting with Prime Minister Takaichi, the two sides issued a joint fact sheet naming some of the corporations that had expressed interest in participating in the framework agreement’s investment scheme, but the details of implementation remained vague.

In an October 27 interview with the Nikkei, US Secretary of Commerce Howard Lutnick stated that Japan’s investment as part of the agreement would be in “things that are fundamental to national security and have virtually no risk” for the Japanese side, and that specific investment targets would be determined jointly by the two countries. Other US government statements, however, place the authority to determine where investment goes primarily in Trump’s hands.

The EU and South Korea have also reached agreements with Washington that reduce the tariff rates applied to their products in exchange for investment pledges. The EU-US agreement sets the baseline and auto products rate at 15%, leaves the door open for “tariff-rate quota solutions” imposing a lower rate for some steel products exported to the United States, and calls for over $600 billion in investment; the Korea-US agreement, too, sets a 15% baseline rate on all products, including cars, and calls for $350 billion in US-bound Korean investment, including in the American shipbuilding industry, along with development of nuclear-powered submarines. There are some differences between the agreements reached with these various partners, but one thing they all have in common with the Japan-US document is the need to thrash out the details of the America-bound investment they promise.

Risky Dependence on the US Market

The Trump administration’s approach to trade has been to engage in bilateral negotiations with individual trade partners, using the threat of high tariffs to force concessions, notably pledges to invest in the United States. This is dealing a serious blow to the rules-based, multilateral trade system relied on in the past. Nations that view the US market as an indispensable one, like Japan, have no option but to come to the negotiating table in a bid to reduce trade uncertainty. Even once an agreement is reached, though, the threat remains that Washington will become dissatisfied by the investment rollout and apply additional punitive tariffs—in the end, the uncertainty is very much still there.

The longer this uncertainty goes on, the more America’s trade partners will seek to reduce the risk of their dependence on its massive market by diversifying their export targets. Indeed, many nations and regions are already moving vigorously to forge new free trade agreements with partners other than the United States.

Meanwhile, there are other countries—like China, Canada, India, and Brazil—that have opted to take their own measures in response to high US tariffs, thereby prolonging their negotiations with Washington. China has agreed to forgo some benefits enjoyed by developing economies within the World Trade Organization and is now describing itself as a champion of the WTO-centered global free trade system. Donald Trump’s unprecedented trade policies are not only impacting American trade relations with its partners—they are bringing new uncertainty to the international commerce system as a whole.

(Originally published in Japanese on December 9, 2025. Banner photo: Akazawa Ryōsei, then minister in charge of economic revitalization, wears a MAGA hat during a meeting with US President Donald Trump over tariff negotiations at the White House on April 16, 2025. © Molly Riley/Handout via Reuters.)