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As Trump’s tariffs hit Japanese exports, PM Ishiba faces rising domestic pressure—caught between economic fallout and alliance diplomacy.
Image Source: Wikimedia Commons
The United States (US) President Donald Trump’s announcement of the ‘Liberation Day’ tariffs has jolted Japan. A tariff rate of 25 percent on Japanese cars and 24 percent on all other Japanese imports has led to a drop in its total exports by 1.7 percent in year-on-year value. As the closest ally of the US in Asia, Japan once again finds itself in a dilemma of alliance management with national economic interests. Japanese Prime Minister (PM) Shigeru Ishiba described the tariffs as a ‘national crisis’ during a parliamentary session. After several rounds of negotiations, Japan continues to seek a full exemption, but the US remains firm, signalling no compromise. Japan’s top trade negotiator, Ryosei Akazawa, admitted that negotiations ‘remained in a fog’ with both sides unwilling to yield. Raising the tensions further, Trump has threatened to impose a 25 percent reciprocal tariff on all Japanese products starting 1 August 2025. Following eight rounds of talks, Trump finally announced a landmark deal with a 15 percent tax on goods imported from Japan, making it the largest deal in history.
Japanese Prime Minister (PM) Shigeru Ishiba described the tariffs as a ‘national crisis’ during a parliamentary session.
In Washington, Trump first met PM Ishiba to discuss trade imbalances and US frustration over limited automotive exports to Japan. “They don’t take our cars, but we take millions of theirs,” Trump said, reflecting his earlier grievances. For the first round of negotiations, the Japanese delegation was led by Minister of Economic Revitalisation Ryosei Akazawa. Following the first rounds of talks, Trump claimed to have made ‘big progress’.
Nonetheless, the meeting yielded a surprisingly productive joint statement, reaffirming commitments to the Free and Open Indo-Pacific (FOIP), cooperation within the Quad (US, Japan, Australia, and India), and condemnation of China’s maritime expansionism, highlighting continued convergence on strategic interests.
At the centre of these trade negotiations is the Japanese automobile industry. Automobiles account for roughly 30 percent of Japan’s exports to the US by value, and they also form around 3 percent of Japan’s Gross Domestic Product (GDP). The tariffs also threaten to disrupt the supply chain and potentially impact investor confidence. Heading for a seventh round of tariff negotiations, Akazawa stated that auto tariffs are “not something we can accept”.
Trump stated that Toyota accounts for 1 million of the foreign-made vehicles, while none of the American companies are allowed to go into other countries. Additionally, American automakers continue to struggle in Japan’s unique market where fuel efficiency, compact size, and quality are non-negotiables. Trump insists the blame lies with Japan’s trade barriers. In truth, US vehicles account for less than 1 percent of Japan’s domestic auto sales, partly due to mismatched consumer preferences.
Automobiles account for roughly 30 percent of Japan’s exports to the US by value, and they also form around 3 percent of Japan’s Gross Domestic Product (GDP). The tariffs also threaten to disrupt the supply chain and potentially impact investor confidence.
Following a series of inconclusive trade talks, Trump threatened to impose a higher tariff of 30-35 percent if a deal is not concluded soon and later also indicated to impose a 25 percent ‘reciprocal tariff’ on all Japanese products. Due to inconclusive talks on tariffs, Japanese automobile companies are considering all possible options to reduce trade imbalance, with Toyota raising the idea of importing its own cars produced in the US alongside offering dealerships for American carmakers in Japan.
Rice, too, has emerged as a flashpoint. Washington has demanded more imports of US rice, a politically sensitive issue in Japan where domestic farming lobbies have long opposed liberalisation. The Japanese government is now reportedly weighing increased imports—despite internal resistance—as part of a broader compromise. Trump pushed further by criticising Japan for not buying American rice. In response, Ishiba went on to clarify that Trump's belief could be based on a misunderstanding and has instead seen high volumes of American rice in recent months. Ishiba has assured to expand Japan's ‘minimum access’ tariff-free quota of around 770,000 tonnes a year. Following the deal, the US stated that Japan would purchase US$8 billion worth of American agricultural products.
A photo-op during the talks also ignited criticism at home. Ishiba’s close aide, Ryosei Akazawa, wore a red hat—“Make America Great Again”—while meeting with Trump. Former PM Yoshihiko Noda, leader of the Constitutional Democratic Party of Japan (CDPJ), condemned the act as “tributary diplomacy,” suggesting it undermined Japan’s sovereignty and dignity on the world stage.
Noda and others also accused Trump of violating World Trade Organisation (WTO) norms, urging Japan to double down on multilateral trade through expanded Comprehensive Trans-Pacific Partnership (CPTPP) engagements, possibly including European countries. However, the opposition hesitated in pushing for a potential no-confidence motion against Ishiba under the present situation of a ‘national crisis’ that could potentially create a political vacuum.
Japan’s traditional policy of seikei bunri (政経分離) (meaning separation of politics and economics) as one of its foreign policy tools is under strain. Historically, the principle helped Japan navigate tensions with major powers without allowing economic issues to derail broader security ties. However, Trump has blurred these lines, reopening the debate on defence burden-sharing. Trump has previously been vocal about the cost of hosting American troops as being insufficient and ‘one-sided’.
Reportedly, Trump had raised the issue of defence spending with Akazawa as he believed that Japan should shoulder more costs. In response, Japan’s Defence Minister General Nakatani and Foreign Minister Takeshi Iwaya rejected reopening talks on the Special Measures Agreement (SMA), which governs cost-sharing for US troops stationed in Japan. It is not due for renegotiation until 2027. Meanwhile, PM Ishiba stated that his government is unwilling to involve security-related discussions during the bilateral trade talks. Ishiba also struggled to conclude a deal with Trump during a bilateral meeting held along the sidelines of the G7 summit in Canada.
During the recent North Atlantic Treaty Organization (NATO) meeting, Trump’s demand for Japan to increase its defence spending to 3.5 percent of GDP would potentially impact public opinion for the upcoming upper house elections due on 20 July 2025. Following the demand, Japan cancelled an upcoming meeting between the 2+2 security talks with the US involving the top diplomats and defence officials of both nations. PM Ishiba’s non-attendance at the NATO meeting also had negative impacts on its optics, and sending his Foreign Minister in his stead drew criticism. However, it may have been done in an attempt to avoid facing Trump in person, as his earlier talks during the G7 were inconclusive.
For Ishiba, the negotiations are more than a diplomatic challenge and they are a defining test of his leadership. Whether history will remember him as a resilient statesman or a casualty of transactional diplomacy remains to be seen.
To ease tensions, Tokyo has implemented procedural reforms for importing US vehicles and unveiled a five-pillar stimulus package, including corporate support, fuel price relief, and subsidies for small businesses. Ishiba emphasised Japan’s contribution to the US economy through investments, job creation, and manufacturing facilities, hoping to appeal to Trump’s transactional instincts.
Moreover, Japan is also diversifying its trade ties with the European Union (EU), the Association of Southeast Asian Nations (ASEAN), and China to offset its growing vulnerability to the US tariffs. Furthermore, Akazawa has also highlighted that Japan is seeking a possible deal in the ministerial-level negotiations. Following Akazawa’s seventh visit to Washington, it was assured that both sides had a ‘fruitful discussion’ and would coordinate to reach a mutually beneficial agreement. While the stakes for Ishiba are high due to the pressure of delivering tangible results, his perceptions of diplomacy have also taken a hit. Ishiba’s resistance towards Trump's tariffs was on full display during an election rally where he stated that “this is a battle for national interests, we will not be disrespected.”
During a recent visit to Japan by US Treasury Secretary, Scott Bessent, a meeting was held with PM Ishiba and Akazawa in Tokyo. The talks culminated in the announcement of a favourable deal via Trump’s social media, Truth Social. The deal alleviated immediate pressure on Japan and positioned it competitively relative to American suppliers. Japan reportedly pledged US$ 550 billion in US investments through its companies in the automobiles, pharmaceutical, steel, shipbuilding, energy, critical minerals, and semiconductor sectors that fits well within Tokyo’s policy on economic security. A potential purchase of 100 Boeing aircraft is also under consideration. Tokyo pursued a strategy of focusing on investments instead of tariffs to reach a successful deal. The deal is conditional on Japan upholding its end of the deal with Bessent cautioning that any shortfall in compliance could prompt a return to the punitive 25 percent tariff. Also, the deal did not have a joint agreement on paper making it uncertain and being subjected to quarterly review by the US may further delay the implementation of the deal.
Ishiba succeeded in securing tariff relief while defending Japan’s core economic and security interests. The outcome demonstrates that allies can resist pressure without jeopardising long-term partnerships. However, lingering uncertainty remains, as no formal written agreement has been signed and is conditional on compliance with US demands. For Ishiba, the negotiations are more than a diplomatic challenge and they are a defining test of his leadership. Whether history will remember him as a resilient statesman or a casualty of transactional diplomacy remains to be seen.
Gaurav Dutta is an independent researcher and a PhD from Jawaharlal Nehru University.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
Gaurav Dutta is an independent researcher and a PhD from Jawaharlal Nehru University. His experience includes working as a Consultant for the Ministry of External ...
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