A man walks in front of an electronic quotation board displaying the Nikkei Stock Average on the Tokyo Stock Exchange in Tokyo on July 23, 2025.
Kazuhiro Nogi | Afp | Getty Images
The anchoring effect is one of the sneakiest tools companies use to make us spend money.
Here’s how it works. Let’s say we’re shopping for a smartphone manufactured by Dapple, which has just released two new models: a $1,200 model with a big screen and a $900 one that is more compact. The more expensive smartphone will serve as the “anchor” by which we make comparisons, so the $900 model will appear to be value for money — even if it is costly in absolute terms. But we’re likely to feel good about choosing it because we’ve “saved” $300 on our purchase.
This scenario seems to be what’s happening with the U.S-Japan trade agreement freshly announced late Tuesday stateside. U.S. President Donald Trump said Washington would gain access to Japan’s markets for rice and cars — which had been sticking points during negotiations — while the latter would see 15% tariffs on its exports to America.
At first glance, that doesn’t sound too positive for Japan. But investors celebrated the news — the Nikkei 225 jumped 3.8% at 1:45 a.m. ET. After all, a 15% tariff rate is a big improvement from the 25% tariff Trump slapped on Tokyo earlier this month. Furthermore, Japanese auto exports to the U.S. — which made up 28.3% of all shipments in 2024 — will face a tariff of 15%, lower than the universal 25% other countries are subject to.
As Brian Jacobsen, chief economist at Annex Wealth Management, said, “It’s a sign of the times that markets would cheer 15% tariffs. A year ago, that level of tariffs would be shocking. Today, we breathe a sigh of relief.” That, in essence, is the anchoring effect at play.
What you need to know today
Trump announces ‘massive’ trade deal with Japan. The country’s exports to the U.S. will face a 15% tariff, Trump said. Japan’s Prime Minister Shigeru Ishiba said auto tariffs on Tokyo will be lowered to 15% from the current 25% across countries.
The U.S. and Indonesia agree on a trade framework. Imports into the U.S. from Indonesia will be set at 19%, while goods flowing from America to the Southeast Asian country will be tariff-free, according to a joint statement issued by the White House on Tuesday.
Tariff suspension with China likely to be extended. The U.S. and China’s 90-day tariff pause expires on Aug. 12. However, U.S. Treasury Secretary Scott Bessent said the U.S. will be “working out what is likely an extension.”
The S&P 500 ticks up to a fresh record. That’s the index’s 11th record close in 2025. On Tuesday, the Dow Jones Industrial Average also rose, but the Nasdaq Composite slipped. Japan’s Nikkei 225 jumped over 3% on Wednesday, fueled by a surge in auto stocks.
[PRO] Tailwinds from China’s $167 billion mega-dam project. China has kicked off construction on the world’s largest hydropower dam, and analysts expect suppliers of the project to receive a huge boost.
And finally…
A staff member prepares for the arrival of Chinese Vice Premier Ding Xuexiang and EU Executive Vice-President for a Clean, Just and Competitive Transition, Teresa Ribera during China-EU Sixth High Level Environment and Climate Dialogue (HECD) at the Diaoyutai State Guest House in Beijing on July 14, 2025.
Wang Zhao | Afp | Getty Images
Chinese and EU leaders are about to meet — but the U.S. is complicating things
China and the European Union will hold a top-level meeting in Beijing on Thursday, while the U.S. is making their already tense relationship more complicated.
Clashes over trade and economic policy, technological issues and defense and security have been commonplace between China and the EU — and tensions have recently been heating up.
— Sophie Kiderlin
Clarification: This report has been updated to reflect that companies pay tariffs.