President Donald Trump announced a long-anticipated trade deal with Japan on Tuesday evening, calling it a framework between two major allies and trading partners that had seemed out of reach only a few weeks earlier.

"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 lawmakers on Tuesday evening.

"They brought their best personnel here, and we worked long and hard on it. And it's a wonderful deal for everyone."

Under this agreement, American buyers will now face a 15 per cent reciprocal tariff on goods imported from Japan. A key benefit for Japan is that this 15 per cent rate will also apply to cars and auto parts, giving Japanese automakers an edge over other exporters who have faced a 25 per cent tariff since April.

Trump also said that Japan will be investing 550 billion dollars in the United States and added that the U.S. "will get 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 earlier posted on Truth Social.

Following the announcement, Japan’s stock market rose to a one-year high on Wednesday, with gains in auto shares pushing the Nikkei index up by 3.7 per cent.

"Mission accomplished," wrote Japan’s chief tariff negotiator Ryosei Akazawa on X, sharing a picture of himself in the White House pointing to an earlier photo of Trump and Japan’s Prime Minister Shigeru Ishiba during past trade discussions.

Speaking to reporters in Washington, DC on Tuesday night, Akazawa said Japan is "the first in the world to be able to cut automobile and automotive part tariffs without a volume limitation."

In Tokyo, Prime Minister Ishiba welcomed the agreement and described it as "the lowest on record for a country that has a trade surplus with the United States." He added that his government would "carefully" study the terms of the agreement.

"We hope this will lead to the establishment of jobs, making good products, and fulfilling other roles in the world with the mutual support of Japan and the US," he told reporters at his office on Wednesday.

Akazawa said the $ 550 billion investment will come as equity and loans to support Japanese companies working in important sectors such as semiconductors and pharmaceuticals.

He also noted that the U.S. rice imports to Japan might increase under the current agriculture trade system, but assured that the deal would "not sacrifice Japanese agriculture."

He further mentioned that Japan will continue discussions with the U.S. on other tariffs not included in Tuesday’s deal, such as those on steel and aluminium, which still face a 50 per cent tax.

This agreement with Japan was the third major trade announcement Trump made on Tuesday. Talks with other key partners like the European Union, South Korea, and India have stalled, especially with Trump’s August 1 deadline for imposing new tariffs approaching.

Both sides had earlier described the negotiations as difficult. When asked in June whether a deal was likely, Trump told reporters on Air Force One, “They’re tough. The Japanese are tough.”

However, on Tuesday, Trump said this 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 pointed out rice sales as a sticking point between the two nations.

"They won't steal our RICE, and yet they're having a huge rice shortage," Trump wrote on Truth Social.

According to U.S. Census Bureau data, Japan bought $ 298 million worth of American rice last year. Between January and April of this year, it purchased $ 114 million worth.

But a 2021 report by the U.S. Trade Representative under President Joe Biden said that "Japan's highly regulated and nontransparent system of importation and distribution for rice restricts US exporters from having access to meaningful access to the consumers of Japan."

Another major topic during the talks was the auto industry, a key part of Japan’s economy. Trump previously said that Japan does not buy U.S. cars. "We didn't give them one car in 10 years," he said earlier this month.

However, the Japan Automobile Importers Association reported that 16,707 American vehicles were imported by Japan last year.

Despite the disagreements over rice and cars, discussions began to make progress last week after U.S. Treasury Secretary Scott Bessent met with Ishiba in Tokyo and posted on X that he was hopeful a deal would be reached.

"A good deal is better than a hurried deal, and a mutually advantageous trade agreement between the United States and Japan is still within the realm of possibility," Bessent posted.

Mary Lovely of the Peterson Institute said the deal eased the pressure of higher tariffs on Japan.

"The 'deal' frees Japan from the threat of a 25% tariff and places it potentially in a competitive position vis-à-vis comparable US suppliers," she said in an email to CNN. "The US won't sell many cars and trucks… from the US." Agricultural liberalisation (is) a victory for Japanese consumers, provided they are willing to sample fine California rice.

Unlike some of the recent trade agreements Trump has announced with countries like Indonesia and the Philippines, Japan is one of the biggest trading partners of the United States.

Japan is the fifth-largest exporter to the U.S., having sent $ 148 billion worth of goods last year, including cars, auto parts, and agricultural and construction equipment, according to the Commerce Department.

Japanese products were briefly subject to a 24 per cent reciprocal tariff before Trump issued a 90-day pause in April. Since then, a 10 per cent minimum tariff has been applied.

In early July, Trump had written to Prime Minister Ishiba threatening to impose a 25 per cent tariff on Japanese goods by August 1.

Meanwhile, the U.S. exported $ 80 billion worth of goods to Japan last year, including oil and gas, pharmaceuticals and aerospace equipment.

In addition to the trade deal, Trump told lawmakers at the White House on Tuesday that the U.S. and Japan are close to launching a joint gas pipeline project in Alaska. The Trump administration has long encouraged allies like Japan, South Korea and Taiwan to invest in this initiative.

"They're all ready to make that deal now," Trump said, without sharing more details.

Japan has faced added pressure during these talks, as China remains its biggest trading partner and the Trump administration has been pushing allies to reduce trade with China in exchange for better trade deals with the U.S., according to several reports.

This new agreement builds on a broader trade deal signed by the U.S. and Japan in 2019, which went into effect the following year and expanded duty-free trade for various products.

Japan also had some negotiating power, being the largest foreign holder of U.S. debt. It currently holds 1.1 trillion dollars in U.S. Treasury bonds, which help finance America’s growing national debt.