A U.S.-Japan Trade Impasse as Ishiba Faces Another Election
The stakes are unusually high in Sunday’s Upper House election. Prime Minister Ishiba Shigeru leads a minority government, and his cabinet’s approval rating has been consistently low. A July 14 poll by NHK registered only 31 percent approval, the lowest of his tenure and hardly cause for optimism days before the election. But Ishiba faces yet another, and more troubling headwind—the Trump administration’s erratic tariff policies.
The past ten months have been a struggle for Japan’s prime minister. Winning by only twenty-one votes in his party’s leadership contest last September, he went on to preside over a trouncing of the LDP the following month in the Lower House election. Only last-minute offers of policy compromise with opposition parties led to his selection as prime minister, and a minority government was formed. Parliamentary committee control also had to be shared, with the largest opposition party, the Constitutional Democratic Party of Japan (CDPJ), taking over leadership of the powerful budget committee. Throughout the spring, Ishiba battled to reach a deal on the government’s budget and to assuage concerns among the public about the rising cost of living.
But a weak political base is not Ishiba’s only problem. The prime minister also had to navigate the transition in U.S. leadership. During his first term in office, Donald J. Trump and Shinzo Abe developed a strong personal relationship, but Abe’s death meant that Ishiba had to build his own relationship with Trump and his new administration. On February 7, Ishiba traveled to Washington, D.C., the second foreign leader to visit the Trump White House. Outwardly, the visit seemed a success; the optics were good, and the personal vibe was positive. Many Japanese observers believed that the special relationship between Tokyo and Washington would continue.
There were issues, to be sure, that promised difficult negotiations ahead. Trump remained wedded to the idea that tariffs could be an effective weapon for recalibrating allied ties. In addition, the fate of Nippon Steel’s troubled effort to acquire U.S. Steel remained unknown. Japanese businesses worried that the Biden administration’s decision to block the purchase by a Japanese company due to “national security concerns” suggested a departure from the close private-sector relationship between the two countries. Japan was, after all, a U.S. ally and one of the largest sources of foreign direct investment in the United States. This was made clear in the press conference held by Ishiba and Trump after their meeting. So too was the Japanese willingness to purchase more LNG from the United States, an important energy priority for the Trump administration.
But the early optimism of the Ishiba-Trump meeting soon began to fade. The tariff announcement on April 2 changed the tone and tenor of U.S.-Japan talks. Trump imposed a reciprocal tariff of 24 percent on Japan, along with an additional 25 percent tariff on automobiles and their parts, plus a 25 percent tariff on steel and aluminum. A ninety-day pause was given on April 9 to allow countries to negotiate trade deals, and the Japanese government got to work on crafting a bilateral deal.
Trump’s proposed tariffs would be disastrous for Japanese businesses. The Japan Business Federation, or Keidanren, expressed serious concerns, noting that blanket tariffs could have “a serious impact not only on Japan-U.S. economic relations but also on the global economy and the free trade system.” Japan’s auto industry would suffer the most. The Japan Automobile Manufacturers Association (JAMA) stated that Japanese automakers have made significant contributions to the U.S. economy and that mutual trust should be preserved. Estimates from Toyota and Honda revealed stunning profit losses—for the Japanese fiscal year 2026, Toyota forecasts a 35 percent profit loss, while Honda forecasts a 70 percent loss.
On April 7, Ishiba told Trump that his Minister in charge of Economic Revitalization, Akazawa Ryosei, would take the lead in negotiations with Washington. U.S.-Japan trade talks kicked off on April 16, and President Trump himself welcomed Ishiba’s delegate, presenting Akazawa with an autographed MAGA hat. Subsequent meetings with Secretary of the Treasury Scott Bessent and Secretary of Commerce Howard Ludwick seemed cordial enough. Yet the two sides struggled to align their goals. Akazawa eventually flew back and forth to Washington six times, hoping to conclude a deal before the G7 Summit in Canada on June 16.
But Ishiba and Trump could not agree. Akazawa tried again at the end of the G7 with his U.S. counterparts to find a compromise, but the talks remained at an impasse. Ishiba made it clear that he would not accept any deal that compromised Japanese interests. The ninety-day pause was due to end on July 9 with no deal in sight. On July 1, Trump claimed, “We’ve dealt with Japan. I’m not sure we’re going to make a deal. I doubt it with Japan. They’re very tough. You have to understand they are very spoiled.”
No further negotiation—and particularly no sudden capitulation—was possible for Japan’s prime minister. The campaign for the Upper House election had already begun on July 3. Ishiba’s hope that Japan could find common ground with the Trump administration on a mutually beneficial deal was dashed. In a much-touted public letter, Trump raised the stakes:
“Our relationship has been, unfortunately, far from Reciprocal. Starting from August 1, 2025, we will charge Japan a Tariff of only 25% on any and all Japanese products sent into the United States, separate from all Sectoral Tariffs. Goods transshipped to evade a higher Tariff will be subject to that higher Tariff…”
Ishiba responded on the campaign trail by declaring that this was now “a battle for our national interest, and we will not be underestimated.”
Amid the trade impasse, the president has periodically noted that the strategic alliance between the U.S. and Japan is “one-sided.” At an April cabinet meeting, Trump noted that the U.S. “pays hundreds of billions of dollars to defend them (Japan), but…they don’t pay anything.” Secretary of Defense Pete Hegseth also declared that the Trump administration wants its Indo-Pacific allies to raise their defense spending to levels equal to the goals set by NATO allies in Europe, now 5 percent. Other DOD officials have specifically called for Japan to hike its military spending to 3 percent of its GDP, prompting Ishiba to push back, stating that Japan will decide its own defense spending.
Going into this weekend’s election, Japanese voters are thinking mainly of their own economic worries. Those worries are likely to grow as the Japanese economy feels the effects of U.S. tariffs. Already, first-quarter economic data suggest a 0.7 percent annual contraction for Japan’s GDP, and a trade deficit of $15 billion (2.2 trillion yen) has been recorded for the first six months of 2025. The economic stakes of the impasse with the United States are high—and getting higher—as Prime Minister Ishiba and his party battle for support at home.
