Japan Deal Secures Tariff Predictability While U.S. Prepares Traceability Standards for Automotive Origin
On July 22, 2025, President Donald J. Trump announced the U.S.–Japan Strategic Trade and Investment Agreement, a sweeping bilateral pact designed to rebalance trade and strengthen America’s industrial base. With over $550 billion in Japanese investment pledged across U.S. industries, the agreement was framed not only as a trade realignment but also as a strategic economic partnership. For the automotive sector, one of the most contested areas of U.S.–Japan trade, the deal marked the start of a new phase in tariff policy and supply chain regulation.
Automobiles and parts are central to the economic relationship between the U.S. and Japan. Historically, tensions arose from the significant volume of Japanese vehicles entering the American market, coupled with concerns about industrial overcapacity and reliance on foreign supply chains. These concerns had already been highlighted under Proclamation 9888 of May 17, 2019, which determined that imports of automobiles and automobile parts threatened to impair U.S. national security under Section 232. Against this backdrop, the July 2025 agreement reset the tariff landscape, replacing punitive duties of 25% or more with a baseline reciprocal tariff of 15% on Japanese autos and parts.
On September 4, 2025, President Trump signed the Executive Order “Implementing the United States–Japan Agreement,” which translated the July framework into binding U.S. law. The order confirmed the new tariff structure, established implementing authorities, and instructed federal agencies to operationalize the deal through customs procedures and enforcement mechanisms. Importantly, the agreement also addressed technical requirements: Japan committed to accept for sale in its domestic market U.S.-manufactured and U.S.-safety-certified passenger vehicles without additional testing. This provision opens long-sought access for American automakers to compete in Japan without duplicative compliance burdens.
The Executive Order specifies that automobiles and parts imported from Japan are now subject to a 15% tariff floor. Where current duty rates in the Harmonized Tariff Schedule (HTSUS) are below 15%, a Section 232 surcharge will apply to raise them to that threshold. If the existing rate is already at or above 15%, no additional duty is imposed. This approach establishes uniformity, simplifies customs administration, and offers predictability for importers and compliance officers managing cost structures in global supply chains.
One of the most significant compliance aspects of the order is the delegation of authority to the Secretary of Commerce, working with the U.S. Trade Representative and U.S. Customs and Border Protection, to issue rules and guidance on origin. The Executive Order explicitly allows the Secretary to determine what qualifies as a “product of Japan” for automobiles and auto parts. This provision ensures that tariff benefits or obligations apply only when genuine Japanese origin can be demonstrated, preventing circumvention through third-country transshipment or minimal processing.
The rules-of-origin mandate in the U.S.–Japan Executive Order does not bring the same kind of clear hints that the U.S.–EU Joint Statement of August 2025 provided. As we noted in our previous article, the transatlantic framework signaled that rules of origin would likely demand melted and poured steel to count as originating, even though the details have not yet been finalized. By comparison, the U.S.–Japan agreement simply provides that “The Secretary may issue rules, regulations, guidance, and procedures to carry out the provisions of this section, including rules for determining whether automobiles and automobile parts are ‘products of Japan’ for purposes of this section.” Taking into account the direction of U.S. trade policy, it is predictable that traceability requirements will be demanded here as well, ensuring transparency across supply chains.
For trade compliance executives, these forthcoming requirements represent a critical area of focus. If the rules of origin follow the same trajectory as other U.S. trade frameworks, traceability obligations are likely to be built into the determinations of Japanese origin. Companies will need to document production footprints, maintain auditable supply chain records, and prepare for potential value-added thresholds or content requirements. The clarity on tariffs offers predictability, but the regulatory detail on origin will require significant compliance resources and adaptation by manufacturers and importers.
While the EU pathway emphasizes steel sourcing standards, the Japan framework leaves its rules of origin yet to be defined. For the automotive sector, this means not only greater stability in tariffs but also the likelihood of a forthcoming, more consistent era of origin-based enforcement. Trade compliance professionals must be ready to anticipate these developments, prepare their organizations for stricter traceability, and take the lead in embedding compliance practices across the supply chain.