Why Global ETFs Could Surge Amid U.S.-Japan Trade Deal

The recent trade breakthrough between the United States and Japan — slashing auto tariffs from 25% to 15% — could usher in a fresh rally in global equities, especially in the auto sector. There is a surge in optimism, which could be reflected in global equity-based exchange-traded funds (ETFs) with broad international exposure, particularly those weighted heavily in automakers, industrials and global exporters.

The Stoxx Europe Autos Index soared 4.2% on July 23, 2025, marking its best daily gain since February. Japanese auto giants like Toyota (+14%), Honda (+11%), and Nissan (+8%) also saw strong upward momentum, on the news of the deal.

Hope for EU Deal Fuels Optimism

Following the Japan deal, eyes have now turned to the European Union. Markets are increasingly pricing in the possibility of a similar trade agreement between the United States and EU, particularly after President Trump signaled that the European negotiations are imminent.

“The Japan deal has significantly raised hopes that the EU might also be able to reach a trade deal,” Deutsche Bank strategists noted, as quoted on CNBC. Citi economists highlighted that Japan secured the tariff reduction without an export cap, potentially setting a precedent for Europe.

If the United States agrees to reduce tariffs on EU auto exports to 15%, as it did for Japan, ETFs with exposure to European automakers like iShares Europe ETF IEV or SPDR EURO STOXX 50 ETF FEZ could see sizable inflows.

Improved Trade Backdrop Strengthens Business Confidence

Multinationals have faced prolonged uncertainty due to escalating tariffs. German software giant SAP revealed that U.S. tariff pressures were causing delays in client decisions, especially among industrials and manufacturers. But with signs that trade relations are normalizing, that phase of uncertainty is likely to recede.

Lower tariffs and greater clarity are expected to enhance capital expenditure, global supply chain flows, and cross-border investment, benefiting international industrial ETFs like the iShares Global Industrials ETF EXI.

U.S. and Global ETFs Set for Momentum Shift

Along with ETFs on Europe and Asia, U.S.-based ETFs are also positioned to gain. Funds like SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust QQQ stand to benefit as American companies engaged in global trade see improved margins and renewed demand.

At the same time, broad global ETFs such as the iShares MSCI World ETF URTH and SPDR MSCI ACWI ex-US ETF CWI offer diversified exposure to rising optimism across multiple regions, including Japan, Europe, and other major trading partners now in the negotiation pipeline.

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This article originally published on Zacks Investment Research (zacks.com).

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