On Wednesday, Japanese stock investors collectively let out a breath of relief after Japan reached an agreement with the U.S., resulting in reduced tariffs on imported goods.
In the context of the agreement, Toyota Motor Corporation (TM) significantly benefited from the positive sentiment towards the Japanese auto industry. On that very day, the company’s shares surged by approximately 14%, outperforming the 0.8% rise in the S&P 500 index.
It was all about the tariffs
On Tuesday, an agreement was reached between Japan and the U.S., lowering tariffs on auto imports from Japan significantly. The tariff on cars will decrease from 27.5% to 15%, while the duty on other Japanese goods will also drop to 15%; it was previously set at 25%.
The 27.5% tariff was established in April, which marked the initial phase of the Trump administration’s plan to impose retaliatory taxes on significant American trade allies. This week’s agreement involves not just a modification of the tariff structure, but also Japan’s promise to invest $550 billion into the U.S., along with loans.
The automobile industry plays a significant role in Japan, as it accounts for over a fourth of their exports to the United States. For many years, their vehicles have been favored by American buyers, and Toyota stands out as a prime example of Japanese achievement within this market.
Domestic manufacturing/import mix
For several years, Toyota has maintained a presence with 11 manufacturing plants within the United States. Consequently, due to its substantial operation in the country, it has managed to bypass significant tariffs to some extent. Nevertheless, to fulfill American consumer demand, Toyota still relies on imports. As a result, even though reduced, tariffs do have an effect. It’s understandable that investors were pleased with the announcement of the tariff cuts.
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2025-07-24 00:53