The U.S. and Japan have reached a trade agreement under which the longtime U.S. will face a 15% tariff—down from a previously threatened 25%—President Donald Trump announced on Tuesday, as Japan’s Prime Minister hailed the move as a “new golden era” in the relationship between the two countries.$TRUMP

Key Facts

The 25% tariff rate slated to hit Japan by August will be lowered to 15%, Trum announced in a Truth Social post, adding that Japan will invest $550 billion into the U.S. under the deal.

Trump added Japan would “open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things.”$SHIB

What To Watch For

With the Japan trade deal set, Trump signaled that another key deal with a major trading partner may be announced soon. Trump told reporters on Tuesday that “We have Europe coming in tomorrow and the next day, we have some other ones coming in.” The lowered tariff rates for Japan, and especially its automakers, appears to have raised hopes for a favorable EU deal, with pan-European STOXX 50 index rising 1.35%. Shares of European carmakers also received a big boost with the Volkswagen Group’s stock rising 6.31%. Mercedes-Benz’s shares are up 5.69% while BMW shares rose 5%.

Key Background

Trump threatened a 25% tariff rate against Japan this month as part of a series of letters sent to multiple countries informing them about their respective rates. Trump also threatened Japan with an even higher rate, saying, “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge.” The president has repeatedly defended his tariff policies since unveiling rates in April, raising the ire of longtime trading partners and alarming experts who say the levies will raise consumer prices. A recent Yale University analysis published before the news of the Japan trade deal 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.