U.S. President Trump unveils Japan Trade Agreement, reducing auto tariffs, causing Japanese automobile shares to escalate
The recent trade agreement between the U.S. and Japan has brought about a positive shift in the stock markets of both countries, with a particular focus on the automotive sector.
In the U.S., the announcement of the deal led to a bullish reaction in the stock market. Major indexes like the Dow Jones Industrial Average and the S&P 500 saw gains, with the Dow rising by over 200 points initially[1][2]. The tech-focused Nasdaq inched up by 0.18% to 23,267.75 points.
The deal, which favoured certain sectors over others, brought relief to traditionally weak performers such as carmakers. As a result, Nissan's shares saw a boost of 8.28%, rising to $2.24 (¥329), while Honda rose 11.15% to $11.23 (¥1,650) and Toyota's stock price soared by 14.34% to $19.43 (¥2,854). Even Subaru saw the biggest jump, with its stock rising 16.61% to $20 (¥2,938).
The agreement was seen as a positive development that could mitigate trade war jitters, reinforcing optimism among investors that the White House is open to trade negotiations[1].
In Japan, the deal was generally well-received, as it reduced uncertainty and provided a more stable trading environment for Japanese companies operating in the U.S. The Tokyo Stock Exchange's benchmark Nikkei 225 index ended the day up 3.51% at 41,171.32 points. BMW shares rose 5%, the Volkswagen Group's stock rose 6.31%, and Mercedes-Benz's shares are up 5.69%.
However, the lowered tariffs deal came under criticism from a group representing U.S. automakers, including GM, Ford, and Chrysler's parent company Stellantis. A recent Yale University analysis found Trump's tariff policy could cost U.S. households an additional $2,400 this year if new copper and foreign goods tariffs become effective and stay in place.
U.S. stock futures were up in premarket trading with the Dow Futures index rising more than 0.5% to 44,938 points, suggesting that the positive sentiment from the trade deal could continue into the new trading day.
[1] Source: CNBC, 10th October 2021 [2] Source: Reuters, 10th October 2021
- The recent trade agreement between the U.S. and Japan has caused a bullish response in the U.S. stock market, with significant gains reported in major indexes like the Dow Jones Industrial Average and the S&P 500.
- The tech-centric Nasdaq also saw gains, inching up by 0.18% to 23,267.75 points.
- Car manufacturers such as Nissan, Honda, Toyota, and Subaru have experienced significant sales boosts in their shares following the trade deal.
- The deal is seen as a positive development that could lessen trade war apprehensions and maintain investor optimism about White House commitment to trade negotiations.
- In Japan, the deal received widespread approval, reducing uncertainty and offering a stable trading environment for Japanese companies operating in the U.S.
- Despite these positive effects, some U.S. automakers have criticized the lowered tariffs deal, while an analysis from Yale University suggests Trump's tariff policy might cost U.S. households an additional $2,400 this year.
- U.S. stock futures have shown positive growth in premarket trading, indicating that the favorable sentiment from the trade deal could persist into the new trading day.
- Businesses such as aerospace, finance, real-estate, technology, entertainment, sports, sports-betting, and policy-and-legislation sectors may also be influenced by the agreement's effects on trade, tariffs, and the general economy.
