President Donald Trump sent markets into a tailspin Monday after officially announcing sweeping 25% tariffs on all imports from Japan and South Korea, starting Aug. 1.
The new tariffs apply to all goods from the two Asian economies and are in addition to any existing sector-specific duties.
The new 25% tariffs follow earlier duties set on April 2 -- 24% for Japan and 25% for South Korea -- after the U.S. claimed trade barriers and currency practices raised effective rates to 46% and 50%, respectively. The hike comes after a 90-day negotiation window, announced April 9, which expired without deals.
In official letters sent to both governments, Trump said the tariffs are necessary to correct "unsustainable trade deficits" caused by "years of tariff and non-tariff policies and trade barriers." He added that any goods transshipped to evade the duties will be charged the higher rate.
Trump emphasized the measure was moderate, saying the 25% rate is "far less than what is needed to eliminate the trade deficit disparity." He also invited Japanese and South Korean firms to move production to the U.S., promising quick and professional regulatory approvals.
Trump stated that if trading partners were to raise their own tariffs, the U.S. would match that increase by adding the same percentage to its newly announced 25% tariff rate.
Earlier in the week, U.S. officials a separate deadline for reaching a deal with the European Union -- before EU goods are subjected to duties of up to 50% -- was set for Wednesday.
The tariff developments comes as the U.S. sets a separate deadline for reaching a trade agreement with the European Union. Without a deal, EU goods could face duties as high as 50%, compounding global trade concerns.
Stocks Slip, Dollar Rallies After Sweeping Tariffs
By midday trading in New York, the S&P 500 dropped 0.9% to 6,220 points, while the Dow Jones Industrial Average tumbled 1.1%, losing more than 450 points to 44,320.
The CBOE Volatility Index (VIX) -- also known as the market’s fear gauge -- rallied 11%. Each S&P 500 sector traded in the red with cyclical stocks underperforming. Tesla Inc. (NASDAQ:TSLA) was the worst performer in both the S&P 500 and the Nasdaq 100.
The EV giant sank 7.4% after Elon Musk announced the launch of the America Party, a new political movement aimed at challenging both Democrats and Republicans over federal spending in Washington.
In currency markets, the U.S. dollar index surged 0.6%, marking its strongest session in nearly three weeks, as investors fled to the greenback amid rising global uncertainty.
The greenback jumped over 1% against the Japanese yen and gained 1.2% against the South Korean won.
U.S. Treasury yields moved higher, with the 10-year bond yield climbing four basis points to 4.39%. Higher tariffs typically stoke inflation fears, which in turn can pressure bond prices and lift yields.
Gold pared earlier losses, buoyed by demand for safe-haven assets in the face of rising trade tensions.
Bitcoin (CRYPTO: BTC) edged down 0.7% to $108,000, extending its streak to 46 consecutive sessions without breaking its all-time high of $112,000.
| Major Indices | Price | Chg % |
| Nasdaq 100 | 22,700.46 | -0.7% |
| S&P 500 | 6,223.21 | -0.9% |
| Dow Jones | 44,321.98 | -1.1% |
| Russell 2000 | 2,212.65 | -1.6% |
According to Benzinga Pro data:
- The Vanguard S&P 500 ETF (NYSE:VOO) slumped 0.9% to $569.94.
- The SPDR Dow Jones Industrial Average (NYSE:DIA) fell 1.1% to $443.18.
- The tech-heavy Invesco QQQ Trust Series (NASDAQ:QQQ) slipped 0.8% to $551.92.
- The iShares Russell 2000 ETF (NYSE:IWM) tumbled 1.5% to $219.79.
- The Consumer Staples Sector SPDR Fund (NYSE:XLP) outperformed, yet down 0.4%; the Energy Select Sector SPDR Fund (NYSE:XLE) lagged, down 1.5%.
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