That gives some sense of stability for the near future. Markets, especially the US Bond market will appreciate it.
the restrainer at work again.
Amen!
How it will work with auto imports into Japan might be a little rough and bumpy unless the US automakers make Japanese compliant versions as their streets are narrow, and one of the the quirks is that they drive on the left like Britain, opposite to the US.
Looking at the reports online on the deal still seems to leave it up to Japanese consumers as to whether they will actually buy US made cars, even ones that are specially made for their different driver side and narrow streets and tight parking. The safety standards are lowered to allow US cars into the market however. One of the interesting items that came up was cars in Japan have a deadline- after 3 years they are no longer allowed to run in Japan, and are sold abroad.
And there is a significant disadvantage now for US automakers.
They pay a premium rate for parts that come in and out of Canada in the usual manufacturing process. I think it's 35% but if it has Canadian steel or aluminum, it could be 50% and depending on how many times it goes back and forth, those tariffs add up. There is already some push back from the US automakers about this deal.
While Japanese cars can enter the States at a flat 15%. Versus 35% to 50% for US manufacturers.
I'm sure Trump and his team will fix that gap fast, as it came up as soon as this deal was made public.
Where it gets murky is that 550 billion "investment" fund by Japan.
https://www.reuters.com/business/fi...be-shared-according-contributions-2025-07-25/
"
The White House said earlier this week the U.S. would retain 90% of the profits from the $550 billion U.S.-bound investment and loans that Japan would make in exchange for lower tariffs on auto and other exports to the U.S.
The official told a briefing that resulting returns will be split 10% for Japan and 90% for the U.S. "based on the respective levels of contribution and risk borne by each side."
Similarly, Japan's top trade negotiator, Ryosei Akazawa, said on Friday that he understands the U.S. side seeking a 90-10 split of returns as a sign of its commitment to shouldering a large share of the contribution and risk.
"Some people are saying Japan is simply handing over $550 billion, but such claims are completely off the mark," he said.
Akazawa also said the final decision on profit sharing will rest with private-sector companies joining forthcoming investment projects.
According to the Japanese government, the U.S. investment package includes loans and guarantees from state-owned Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI).
A law revision in 2023 has expanded the scope of JBIC, making foreign companies key to Japan's supply chains eligible for loans from the bank.
The investment package will allow Japan to build resilient supply chains in the United States that benefit both countries in sectors key to national security, such as semiconductors, pharmaceuticals, steel and shipbuilding.
The U.S. is largely dependent on Taiwan Semiconductor Manufacturing Co for advanced chip manufacturing currently, raising economic security concerns due to Taiwan's geographic proximity to China."
This last paragraph is the one to pay attention to. Both the US and Japan depend on Taiwan for advanced chips. This deal is a GOOD one for both based on that one item alone. Diversification of chip manufacture.
An odd little side effect of getting advanced chips made outside of Taiwan- it reduces the risk that China will grab Taiwan. One of the incentives for China to invade has been to capture the advanced chip manufacturing and put it in China's control. Once other countries make those chips, China loses one of the incentives (still leaves the nationalistic desire to grab Taiwan though)
The part nobody is talking about and should, is how much of the US debt (in govt bonds) does Japan hold?
The answer is A LOT. Japan is the largest holder of US govt bonds aka US debt. In April of 25 it was 1.13 Trillion. The US debt was approximately 36 Trillion at that time (sources online google) so it's still a smaller slice of the whole, but significant enough if Japan suddenly had to sell off the bonds they hold due to internal financial problems.
China used to be next, but they slipped to third place after Britain due to a sell off earlier this year and I think it is NOT a coincidence that these are the 3 important trade deals that Trump inked so far. All 3 hold a LOT of US debt in bonds!!!! If it is coincidence, it is yet more evidence of The Restrainer restraining things.
This deal came at the best possible time for Japan, and for the world economy as a whole, not to mention the US debt problem that could unleash if Japan were to topple into crisis due to a change in leadership.
This is definitely one of those moments we can look at and see The Restrainer at work. It's also a sign of how close we are to financial collapse as the whole international economy is like a house of cards, with one card short of blowing up completely.
Dodged another bullet, but the world's economy is teetering on the brink. One wrong move and the whole thing goes up. I think Britt Gilette and others have called it a gigantic Ponzi scheme and so it is.
nypost.com
