US President Donald Trump signed an executive order on Thursday that cuts tariffs on Japanese car imports from 27.5% to 15%, easing uncertainty for motor industry giants like Toyota, Honda and Nissan.

It formalises an agreement, which was announced in July, to apply a 15% levy to almost all Japanese exports to the US – including vehicles and pharmaceuticals.

Tokyo has also agreed to invest $550bn (£410bn) in US projects, and gradually open its economy to American goods, including cars and rice, the White House said.

The deal came after months of negotiations between the US and Japan in the wake of Trump announcing sweeping tariffs on most countries around the world in April.

The Japanese economy is reliant on exports, with cars accounting for around 20% of the country’s total exports.

Trump’s tariffs, which came into effect in August, have sent shockwaves around world as governments and businesses adapt to the changing global market.

Last month, Toyota warned that the impact of US tariffs would cost it around $10bn this year.