The Tariff Turnaround: How Resolved U.S.-Japan Trade Tensions Could Ignite Automotive and Steel Stocks

The U.S.-Japan tariff negotiations have reached a pivotal moment. With the G7 summit looming, the two economic powerhouses are racing to resolve a trade impasse that has cost Japan a $800 million trade deficit and sent U.S. steelmakers scrambling for advantage. But beneath the tension lies a golden opportunity: the stocks of automotive and steel firms positioned to surge once tariffs ease.

The stakes are colossal. Japan's automotive exports—28% of its shipments to the U.S.—face a 25% tariff wall, while U.S. steel companies enjoy a shielded market. Yet with both sides inching closer to a deal, now is the moment to act. Here's why—and which stocks to buy now.

The Automotive Sector: A Value Play on Resolution

Japan's auto giants are undervalued casualties of the tariff war. Toyota (TM) and Honda (HMC) trade at P/E ratios of 7.31 and 7.00, respectively—historically low multiples that reflect market skepticism about their ability to navigate trade barriers. But these metrics mask a hidden upside.

Toyota, despite a 0.7% Q1 GDP drag in Japan, remains a fortress of cash flow and global reach. Its $34.1 billion net income in 2024 and 14.28% ROE suggest resilience. Analysts at Zacks have already upgraded Q3 earnings estimates, anticipating a post-tariff rebound. Meanwhile, its $3.3 billion AI partnership with NTT and EV collaborations with Suzuki signal a pivot to future growth.

Honda, too, delivers: its 38% Q1 EPS beat in 2025 defied seasonal headwinds, and its 3.8% dividend yield offers a cushion. With a P/E of 6.46, it's a bet on Japan's ability to retain its crown as the auto industry's innovator.

The Steel Sector: Winners in a Protected Market

On the U.S. side, steelmakers have thrived under tariffs—until now. Nucor (NUE) and Steel Dynamics (STLD) are trading at price-to-book ratios of 1.4x, far below the 4.8x global average. Their valuations are a gift.

Nucor, with a 25% upside target from JPMorgan, has leveraged tariffs to dominate domestic demand. Its Mini Mill strategy and Big River Steel expansion have kept margins robust, even as rivals struggle. The stock's 47% year-to-date buyback surge signals confidence.

Steel Dynamics (STLD), while rated “Hold,” has outperformed the S&P 500 by 8% in a month. Its 14.5% upside potential and declining short interest make it a sleeper pick.

The Catalyst: G7 Summit or Bust

The G7 summit in June could be the breaking point. If Japan secures tariff relief—or at least a pause—auto stocks will surge. Analysts at Capital Economics warn that a deal could lift Japan's GDP by 0.5% in Q3 alone. Even a partial agreement would reduce the risk of a 24% retaliatory tariff on Japanese goods, now set to expire in July.

But time is short. The July 9 deadline for the current 10% tariff suspension looms. Investors should act before uncertainty crystallizes.

Risks? Yes. But the Reward Outweighs Them

Skeptics point to Japan's 0.7% GDP contraction in Q1 and the U.S. Federal Reserve's October rate hike threat. Yet both firms and industries are preparing. Toyota's $200 billion U.S. investment pledge and Honda's restructuring efforts signal readiness.

The Bottom Line: Buy Now, Before the Deal Unfolds

The U.S.-Japan talks are a zero-sum game—until they're not. A resolution would unlock pent-up demand for Japanese autos and U.S. steel. With P/E ratios at multiyear lows and analyst sentiment turning bullish, now is the time to buy Toyota, Honda, Nucor, and Steel Dynamics.

The G7 summit could be the trigger. Don't wait for clarity—act now.