Stocks Slide as Trump Unveils Tariffs on Japan, South Korea and Other Trade Partners

Wall Street spent Monday afternoon watching the letters arrive. President Donald Trump posted them on Truth Social, one country after another, and as each set out a new tariff rate, US stocks slid further. By the close, the Dow Jones Industrial Average was down 422 points, or 0.94%. The S&P 500 had lost 0.79% and the Nasdaq Composite 0.92%. It was the worst day for all three indexes in about three weeks.

The first big drop came around midday, when Trump announced 25% tariffs on Japan and South Korea, effective August 1. Later came rates ranging from 25% to 40% on a longer list that included Myanmar, Malaysia, Kazakhstan, Laos and South Africa. The letters say the rates may be modified, upward or downward, and the tariffs are separate from sectoral tariffs. Trump had said on Sunday that the letters would go out at noon Monday, and on Friday he had told reporters they would disclose new rates for August 1. Press Secretary Karoline Leavitt said the president would sign an executive order moving the July 9 deadline to August 1, which gives negotiators a timeline.

The damage was concentrated in companies and funds tied to the targeted countries. US-listed shares of Toyota fell 4%, Nissan 7.16% and Honda 3.86%. LG Display dropped 8.3% and SK Telecom 7.76%. BlackRock ETFs tracking Japan, South Korea, South Africa and Malaysia fell 2.4%, 3.56%, 1.73% and 1.97%, and the Japan, South Korea and Malaysia funds had their worst day since early April. Ross Mayfield, an investment strategist at Baird, told CNN the proposed rates were higher than the market had expected, which drove the selling.

Bonds and currencies moved too. The 10-year Treasury yield rose to 4.39% and the 30-year to 4.92%; yields rise as prices fall. The US dollar index gained 0.3%, while the yen, the South Korean won and the South African rand all weakened against the dollar.

Asia's reaction on Tuesday was calmer. Early on, Japan's Nikkei 225 rose 0.5%, South Korea's Kospi gained 1.5%, Hong Kong's Hang Seng added 0.3%, and Australia's S&P/ASX 200 was up less than 0.1%. Kai Wang, Asia equity market strategist at Morningstar, read this as investors focusing on the new deadline as a sign of progress. In his words, Asian markets are treating the move more as posturing than policy, with room left for dialogue.

The selloff came after a strong run. The S&P 500 had set four record highs since June 27, helped by economic data stronger than expected. BMO's Brian Belski noted in a July 3 note that cooler-than-anticipated CPI numbers suggested a muted tariff impact, for now. The Dow, even after Monday, sat about 608 points below its own record. Mohit Kumar of Jefferies expects near-term uncertainty and some profit taking, but sees the letters as an incentive for quick deals, expects more to be signed in coming weeks, and calls a dip a buying opportunity. Treasury Secretary Scott Bessent told CNBC he expects several announcements within 48 hours, and had told CNN's Dana Bash on Sunday that rates would boomerang higher on August 1 if deals were not completed.

Not everyone is so sanguine. Scott Wren of Wells Fargo Investment Institute called the Wall Street consensus overly optimistic, worrying that once tariff rates settle, the economy could slow and consumer spending pull back. His firm is looking to trim positions in areas it considers overvalued, including US small caps and consumer discretionary stocks. Trump also announced on Sunday an additional 10% tariff on countries aligning with BRICS, whose founding members include Brazil, Russia, India, China and South Africa.

This week, markets will be watching for any further tariff rates. Lukman Otunuga of FXTM warned that if rates come in above expectations and revive recession fears and trade uncertainty, stocks could be slammed while safe havens rally. Whether deals land before August 1 will largely decide which view prevails.