What does the new U.S.-Japan trade deal mean?

In a significant move just days before a major tariff deadline, the United States and Japan have reached a new trade agreement that reduces tariffs on all Japanese imports from a proposed 25% to 15%.

The deal is considered the most substantial among a series of trade agreements the White House has finalized before the August 1 deadline, when higher levies were expected to take effect.

One of the biggest beneficiaries is Japan’s auto industry, which represents over 25% of the country’s exports to the U.S. Industry and government sources say the tariff reduction from 25% to 15% on Japanese autos could reshape dynamics in the global car market.

In return, Japan has committed to a massive $550 billion package of U.S.-bound investment and loans. However, not everyone is pleased: U.S. automakers have voiced concerns about unequal treatment, as tariffs on auto imports from Canada and Mexico will remain at 25%.

The two countries currently maintain a two-way trade relationship worth nearly $230 billion, with Japan running a $70 billion surplus.