Japan‘s economy contracted at a 1.8% annualized rate in the third quarter of 2025, as President Donald Trump’s tariffs have caught up with the island nation’s exports.

Trump reached a trade deal with Japan in July, announcing a 15% baseline reciprocal tariff rate on the nation instead of the previously threatened 25% tariff rate. As part of the deal, Japan committed to invest $550 billion into the United States, including in the form of energy infrastructure, artificial intelligence infrastructure, and electronics investments.