By Kit Maher and Elisabeth Buchwald, CNN

(CNN) — President Donald Trump announced a long-awaited trade agreement with Japan on Tuesday night, a framework between allies and major trading partners that appeared elusive just weeks ago.

“I just signed the largest trade deal in history; I think maybe the largest deal in history with Japan,” Trump said during a reception with Republican members of Congress Tuesday night.

“They had their top people here, and we worked on it long and hard. And it’s a great deal for everybody.”

The deal will see US importers pay 15% “reciprocal” tariffs on Japanese goods exported to the United States. But importantly for Japan, the 15% rate will also extend to automobiles and car parts - putting it at an advantage over other major vehicle exporters, which have faced a 25% levy on automotive sector exports since April.

Japan will also invest $550 billion dollars into the United States, Trump said, adding that the US “will receive 90% of the profits.”

“This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it. Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%,” Trump had posted earlier on Truth Social.

The news saw Japanese markets hit a one-year high on Wednesday, with a surge in the price of automaker shares pushing the Nikkei 3.7% higher.

“Mission accomplished,” proclaimed Japan’s tariff negotiation Ryosei Akazawa in a post on X, accompanied with a photo of himself in the White House pointing to an image of Trump and Japan’s Prime Minister Shigeru Ishiba in prior talks.

Japan is “the first in the world to be able to reduce tariffs on automobiles and auto parts without volume restrictions,” Akazawa told reporters in Washington DC Tuesday night.

In Tokyo, Ishiba hailed the deal as “the lowest figure to date for a country that has a trade surplus with the United States,” adding that the government will examine the details of the deal “carefully.”

“We believe that this will contribute to the creation of jobs, the production of good products, and the fulfillment of various roles in the world through the mutual cooperation of Japan and the US,” he told reporters at his office on Wednesday.

Akazawa explained that the Japanese injection of $550 billion into the US would be in the form of equity and loan to support Japanese businesses’ investments in key fields such as pharmaceuticals and semiconductors.

The share of American rice imports may increase under the current agricultural trade framework, Akazawa said, while stressing that the agreement would “not sacrifice Japanese agriculture.”

Japan will also continue discussions with the US on other tariff measures not covered in Tuesday’s deal, including steel and aluminum, which remain subject to a 50% levy, Akazawa said.

The Japan agreement was the third piece of trade-related news Trump announced on Tuesday. This comes after months of negotiations with key trading partners like the European Union, South Korea, India and dozens of others at a standstill as Trump’s latest August 1 deadline for higher tariffs looms.

Tough negotiations

Both sides previously described the negotiations as tense. Asked about the chance of a trade deal with Japan in June, Trump told reporters aboard Air Force One, “They’re tough. The Japanese are tough.”

But on Tuesday Trump said the deal marked a “very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan.”

Late last month, Trump highlighted rice sales as one point of contention between the two nations.

“They won’t take our RICE, and yet they have a massive rice shortage,” Trump said in a post on Truth Social.

The country bought $298 million worth of rice from the US last year, according to US Census Bureau trade data. Between January and April of this year, Japan bought $114 million worth of rice.

But a 2021 report published by the Office of the United States Trade Representative under former President Joe Biden stated that “Japan’s highly regulated and nontransparent system of importation and distribution for rice limits the ability of US exporters to have meaningful access to Japan’s consumers.”

Cars – a pillar of the Japanese economy – have also been an issue in the negotiations. Trump has said Japan does not import US cars. “We didn’t give them one car in 10 years,” he said earlier this month.

Last year, Japan imported 16,707 units of American automobiles, according to the Japan Automobile Importers Association.

Despite sticking points like rice and cars, the tensions in negotiations showed signs of easing last week after US Treasury Secretary Scott Bessent met with Ishiba in Tokyo and posted on X that he was optimistic about reaching a deal.

“A good deal is more important than a rushed deal, and a mutually beneficial trade agreement between the United States and Japan remains within the realm of possibility,” Bessent said.

Mary Lovely at the Peterson Institute said the agreement eased the threat of even higher tariffs on Japan.

“The ‘deal’ relieves Japan of the 25% tariff threat and puts it potentially in a competitive position vis a vis similar US suppliers,” she wrote in an email to CNN. “The US is unlikely to sell many cars and trucks… from the US. Agricultural liberalization (is) a win for Japanese consumers, assuming they are willing to try excellent California rice.”

A major trading partner

Unlike some of the agreements Trump has announced recently, including with Indonesia and the Philippines, Japan is a significant trading partner with the United States.

Japan is the United States’ fifth-largest source of imports. Last year, it shipped $148 billion worth of goods to the US, according to Commerce Department data. Cars, car parts and agricultural and construction machinery were among the top goods Americans bought from there.

Goods from Japan briefly faced a 24% “reciprocal” tariff before Trump enacted a 90-day pause in April. Since then goods have faced a 10% minimum tariff.

In early July, Trump sent a letter to Japan’s prime minister, Shigeru Ishiba, threatening to enact a 25% tariff on August 1.

Meanwhile, the US exported $80 billion worth of goods to Japan last year. Oil and gas, pharmaceuticals and aerospace products were the top exports.

Beyond the trade deal, Trump told lawmakers at the White House Tuesday that Tokyo and Washington are close to forming a joint venture for a gas pipeline project in Alaska. The Trump Administration has long sought to encourage its Asian allies, from Japan, South Korea, to Taiwan, to invest in the Alaska venture.

“They’re all set to make that deal now,” Trump said, without providing more details.

Japan has been in an uncomfortable position, since China is its top trading partner and the Trump administration had been looking to pressure allies to reduce their levels of trade with China to get a trade deal with the US, according to multiple reports.

The latest agreement between the US and Japan follows an expanded trade agreement the two countries signed in 2019, which went into effect the subsequent year and allowed for more goods to be shipped duty-free.

Japan held some leverage over the United States in its trade agreement: The nation is America’s biggest foreign creditor. Japan holds $1.1 trillion of US Treasuries, used to finance America’s massive and mounting debt.

This story has been updated with additional context and developments.

CNN’s John Liu, Yumi Asada and Matt Egan contributed reporting.

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