Details of U.S.-Japan Trade Deal Announced; Clarification Still Needed for U.S.-EU Deal

Although the U.S. announced trade deals with Japan and the EU in August, many details were left for later action, which now has taken place with respect to Japan in Executive Order 14345, released on September 4, 2025. Further specifics regarding the U.S.-EU deal are still evolving. Both agreements include retroactive provisions and refund opportunities, prompting importers to reassess compliance strategies and monitor U.S. Customs enforcement closely.

U.S.–Japan Trade Agreement

The new U.S.–Japan Trade Agreement imposes a 15% baseline reciprocal tariff on Japanese-origin goods only when the applicable Harmonized Tariff Schedule of the United States (HTSUS) Column 1 duty rate is below 15%. Goods already subject to a duty rate of 15% or higher will not be subject to additional tariffs under this agreement.

Japanese automobiles and auto parts are generally subject to a maximum 15% tariff under the U.S.–Japan Trade Agreement, unless their current HTSUS duty rate already meets or exceeds that threshold. Notably, these goods are also exempt from Section 232 tariffs, which were previously imposed on certain automotive imports under national security provisions. For civil aircraft and aircraft parts (excluding unmanned aircraft), tariffs previously imposed under executive actions have been removed. Additionally, Japanese imports classified as natural resources unavailable in the U.S., along with generic pharmaceuticals, their ingredients, and chemical precursors, are exempt from reciprocal tariffs.

The agreement is retroactively effective as from August 7, 2025. Importers may be eligible for duty refunds on qualifying goods entered for consumption or withdrawn from bonded warehouses on or after that date.

Beyond tariff adjustments, Japan has committed to significant economic engagement with the U.S. This includes a 75% increase in U.S. rice imports, along with expanded purchases of American agricultural products such as corn, soybeans, fertilizer, and bioethanol. Japan is also streamlining regulatory approvals for U.S.-manufactured, safety-certified passenger vehicles, allowing them to be sold domestically without additional testing. Furthermore, Japan has agreed to procure U.S.-made commercial aircraft and defense equipment, creating new opportunities for American aerospace and defense industries. These measures aim to bolster U.S. manufacturing, agriculture, and industrial sectors through enhanced exports and investment.

U.S.–EU Trade Deal Exemption

On August 21, 2025, the U.S. and the EU announced a Framework Agreement on Reciprocal, Fair, and Balanced Trade. Under this framework, the EU will eliminate tariffs on all U.S. industrial goods and expand preferential access for American seafood and agricultural products.

For EU-origin goods, the U.S. will apply either the Normal Trade Relations (NTR) tariff rate or a 15% tariff ceiling, depending on which is higher. If the NTR rate exceeds 15%, only the NTR rate will apply, with no additional reciprocal tariffs. However, effective September 1, 2025, certain EU products, including aircraft, aircraft parts, generic pharmaceuticals, and specific natural resources, are explicitly designated to be subject to NTR tariffs only, exempting them from the additional 15% reciprocal rate.

Despite these exemptions, U.S. Customs and Border Protection (CBP) has reportedly continued to apply the 15% tariff to some of these items. Importers affected by this discrepancy should monitor official updates closely and consider filing refund claims or protests for any overpaid duties.

EO Modifying Reciprocal Tariffs and Establishing Framework for Trade Agreements

A new Executive Order (EO) (and Fact Sheet) published on September 5, 2025 modifies the scope of the reciprocal tariffs announced on April 2 and sets out a framework for existing and future trade agreements with trading partners. Specifically, the EO contains new procedures for implementing the reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and for implementing trade agreements with countries seeking to avoid or reduce tariff rates on their goods exported to the U.S. The EO lists products that may be eligible for exemption from reciprocal tariffs for countries that do conclude a trade agreement with the U.S.

The EO adds and removes goods from the list of excluded goods in Annex II of EO 14257 released in April. Annex II contained a list of Harmonized Tariff Schedule (HTS) codes that were exempt from the IEEPA reciprocal tariffs because the goods under those codes were either subject to current or potentially future Section 232 investigations. The September 5 EO adds bullion-related articles and certain critical minerals and pharmaceutical products subject to pending Section 232 investigations to the excluded list. Goods removed from Annex II include certain aluminum hydroxide, resin, and silicone products, which are now subject to reciprocal tariffs. The changes apply as from September 8.

With respect to recently concluded and future trade deals, the EO indicates that President Trump may be willing to suspend reciprocal tariffs and/or reduce Section 232 tariffs for designated products imported from countries with which the U.S. concludes a final trade agreement. Annex III, entitled “Potential Tariff Adjustments for Aligned Partners,” identifies products that would be eligible for a potential 0% reciprocal tariff based on the scope and nature of the trading partner’s commitments under the relevant agreement. The annex lists certain agricultural products, aircraft and parts, and generic pharmaceutical inputs that would fall in this category. [Annex III in the April EO contained a list of products that are potentially eligible for exemption from reciprocal tariffs for trading partners that conclude a trade agreement with the U.S. based on whether the trading partner takes “significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters.”] 

The potential for a 0% rate is an attractive incentive for interested countries to negotiate new agreements even though President Trump does not pledge to reduce the tariff rate to zero. Factors that will be relevant in any decision to reduce the reciprocal tariff rate will depend on the scope and economic value of a trading partner’s commitments to the U.S., U.S. national interests, and the need to address the national emergency and threats to national security. Notably, products that may benefit from a 0% reciprocal tariff may be different for each trade agreement.