US stocks fell Monday after President Donald Trump announced a flurry of tariffs on countries including Japan, South Korea, and South Africa. The Dow closed lower by 422 points, or 0.94%. The S&P 500 fell 0.79%, and the tech-heavy Nasdaq Composite fell 0.92%.
These declines marked the worst day in about three weeks for the three major indexes. Stocks dropped further midday after Trump announced 25% tariffs on Japan and South Korea, effective August 1. Additional tariffs, ranging from 25% to 40%, were announced on countries including Myanmar, Malaysia, Kazakhstan, Laos, and South Africa.
Trump posted letters on Truth Social outlining the tariffs, which he noted could be modified. Investors reacted as Wall Street mulled the Trump administration’s new trade policies. Trump indicated that letters would be sent to the affected countries, notifying them of the tariff rates and extending negotiations until August 1.
White House Press Secretary Karoline Leavitt confirmed that Trump would move the initial July 9 tariff deadline to August 1 to allow more time for talks. Major US-listed shares in Japanese automakers Toyota, Nissan, and Honda dropped by 4%, 7.16%, and 3.86%, respectively. South Korean technology companies LG Display and SK Telecom saw drops of 8.3% and 7.76%, respectively.
ETFs managed by BlackRock that track Japanese, South Korean, South African, and Malaysian stocks were also down.
Tariffs shake investor confidence
Many market analysts pointed to the higher-than-expected proposed tariff rates as a reason for the sharp sell-off.
US government bonds also reacted, with the 10-year Treasury yield rising to 4.39% and the 30-year yield rising to 4.92%. The US dollar index gained 0.3%, while the Japanese yen, South Korean won, and South African rand weakened against the dollar. In Asian markets, Japan’s Nikkei 225 Index rose 0.5% in early trading, while South Korea’s Kospi gained 1.5%.
Hong Kong’s Hang Seng Index and Australia’s S&P/ASX 200 saw minor increases. Kai Wang, an Asia equity market strategist at Morningstar, suggested that Asian markets interpreted the tariff moves as posturing and focused on the new negotiation deadline. Despite the dip in stocks, some investment strategists view this period as a buying opportunity, anticipating that economic data and potential upcoming trade deals could buoy markets.
Treasury Secretary Scott Bessent mentioned that announcements regarding trade deals might come within 48 hours. However, not all analysts agree on the continued positive outlook. Scott Wren, a global market strategist at Wells Fargo Investment Institute, warned that the Wall Street consensus could be overly optimistic about the tariff situation.
He cautioned that the economy may slow down and consumer spending could pull back as tariff rates are finalized. The uncertainty over tariffs contributes to a complex investment climate. While some investors are hopeful for upcoming trade deals, others warn of potential recession fears and economic slowdown if tariffs are not resolved favorably.
