Japan slipped back into a trade deficit in July as exports recorded their steepest fall in more than four years, signalling that U.S. tariffs are biting harder and clouding the outlook for an already fragile recovery. Finance-ministry data showed a shortfall of ¥117.5 billion ($810 million), starkly missing economists’ expectations for a ¥198.5 billion surplus. On a seasonally adjusted basis the gap widened to ¥303 billion. Shipments abroad shrank 2.6% from a year earlier, led by a 10.1% slide in exports to the United States, where automotive sales were hit by higher duties. Sales to China and the European Union fell 3.5% and 3.4%, respectively. Imports dropped 7.5%, a smaller decline than forecast, reflecting softer commodity prices but resilient domestic demand. The disappointing figures, released hours after the Nikkei 225 had notched yet another intraday record of 43,846, helped trigger profit-taking in Tokyo equities already rattled by an overnight sell-off in U.S. technology stocks. The benchmark index fell as much as 1.8%, or about 800 points, to 42,776 in Wednesday morning trading, with heavyweight chip names and SoftBank Group tumbling 6–9%. Investors will watch whether the export slump persists amid hefty U.S. tariffs and how the Bank of Japan responds, as weaker external demand and a stronger yen risk undercutting corporate earnings just as domestic consumption shows signs of fatigue.