Trade Deal With Japan Lifts Market Sentiment, But Auto Sector Voices Concern

by | Jul 23, 2025 | The Doctor's Dose

U.S.-Japan trade deal impact on stock market

Stock futures surged early Wednesday following President Donald Trump’s announcement of a “massive Deal” with Japan, bolstering hopes for additional trade agreements and easing market uncertainty surrounding upcoming tariff deadlines.

Trump’s Tuesday night post on Truth Social revealed that the U.S. and Japan had agreed to a trade pact featuring reciprocal 15% tariffs on Japanese exports to the U.S. The news gave a boost to equity markets:

  • Dow Jones Industrial Average futures climbed 215 points (+0.5%)

  • S&P 500 futures rose 0.4%

  • Nasdaq-100 futures edged up 0.1%

The president also indicated that U.S. officials are actively negotiating with European leaders on a similar trade accord ahead of an August 1 tariff deadline—an effort aimed at building a more favorable international trade environment following his sweeping April 2 tariff announcement that roiled markets.

U.S.-Japan trade deal impact on stock market

Markets React Positively

Wednesday’s uptick followed two consecutive intense sessions for U.S. equities. The S&P 500 posted a modest 0.06% gain Tuesday, marking its 11th record close of 2025, while the Dow advanced nearly 180 points. However, the Nasdaq Composite slipped 0.4% as chipmakers came under pressure.

Investors are now looking ahead to major earnings reports from Alphabet and Tesla, both of which are due after the close. Their results will kick off a critical earnings cycle for the megacap tech sector, which has been pivotal in driving market momentum. Other closely watched reports include Chipotle Mexican Grill and Mattel, as earnings season heats up.

So far, results have been strong. Of the 105 S&P 500 companies that have reported, over 86% have beaten earnings expectations, according to FactSet.

Automakers Push Back

Despite the market’s upbeat tone, the new U.S.-Japan trade deal has sparked backlash from American automakers. The American Automotive Policy Council (AAPC), representing GM, Ford, and Stellantis, has raised red flags over a provision that would drop tariffs on Japanese auto imports to 15%, while Canadian and Mexican imports remain subject to a 25% rate.

Matt Blunt, AAPC president and former Missouri governor, warned:

“Any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American built vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers.”

Trump has threatened to hike tariffs on Mexico to 30% and Canada to 35% starting August 1, further fueling industry fears.

Industry Impact Already Visible

The effects of the administration’s aggressive trade stance are already showing.

  • GM said its Q2 earnings took a $1.1 billion hit from tariffs and warned of a worsening impact in Q3.

  • Stellantis reported a €300 million ($352 million) cost from U.S. tariffs so far in 2025, noting cutbacks in vehicle shipments and production.

  • In May, AAPC criticized a UK trade deal that allows British automakers to ship 100,000 cars per year at a 10% tariff, arguing it disadvantages U.S. workers.

The White House, however, stood by the deal. Spokesman Kush Desai called it:

“A historic win for American automakers by putting an end to Japan’s unfair auto trade barriers for American-made cars.”

Outlook

While markets embraced the news as a sign of progress on the trade front, the underlying tension between political wins and economic consequences is growing sharper—particularly in the automotive sector. With earnings from key players on deck and the August 1 deadline looming, both investors and manufacturers are bracing for a high-stakes month.

Bottom line: The trade deal with Japan has injected near-term optimism into the markets, but unresolved tariff imbalances and mounting industry costs may temper that enthusiasm as the full implications unfold.