Japan's Trade Deal with U.S. Sets Global Benchmark Amid Tariff Negotiations

Japan's new trade agreement with the U.S. reduces tariffs on auto imports and sets a 15% benchmark for future deals, potentially influencing the global economy. The agreement, a significant achievement for the U.S., pressures China and the EU as they face critical trade deadlines with potential high tariffs.

Japan's recent trade agreement with the United States is poised to become a global benchmark for ongoing negotiations with Washington, according to economists. The deal lowers tariffs on Japanese auto imports to 15% from a previous 27.5%, relieving potentially crippling duties on goods set to increase this August.

Economists suggest that while a 15% duty remains significant, it is more manageable amidst the economic uncertainty that disrupted firm investment planning. Mohit Kumar of Jefferies noted that recent trade agreements might push average tariffs slightly higher than this figure in the long-term view.

The agreement has bolstered stock markets, particularly automakers like Japan's Nikkei, Volvo Car stocks, and major German manufacturers. Optimism surrounds reaching reasonable tariff levels globally, but concerns remain over looming high tariffs for the EU, Canada, and Brazil, with potential deals affecting inflation and interest rates.

(With inputs from agencies.)