President Donald Trump announced additional tariffs on 14 countries, including Japan, South Korea, and South Africa. The tariffs, set to go into effect on August 1, are higher than initially expected, with Japan and Malaysia facing a 25% levy. The announcement resulted in a losing session for the major stock averages on Monday.
The Dow tumbled more than 400 points, or 0.9%. The S&P 500 fell 0.8%, while the Nasdaq slid 0.9%. US-listed shares in major Japanese automakers Toyota, Nissan, and Honda dropped by 4%, 7.16%, and 3.86%, respectively.
Shares in South Korean technology companies LG Display and SK Telecom declined by 8.3% and 7.76%, respectively. Ross Mayfield, an investment strategist at Baird, noted that the proposed tariff rates were higher than the market was expecting, leading to a sell-off in stocks.
Tariff hike impacts global markets
US government bonds also slid as investors reacted to the tariff developments, with the 10-year Treasury yield rising to 4.39% and the 30-year yield increasing to 4.92%. Despite the announcements, many investors remain confident that the stock market has moved past the worst of the tariffs and are hopeful that the upcoming earnings season could be a catalyst for continued advancement. “If you go through the details, I don’t even know if anybody understands the difference between what was announced today, what was there previously, and if it will actually be implemented, and which companies it impacts,” said Trivariate Research CEO Adam Parker.
Treasury Secretary Scott Bessent echoed this sentiment, suggesting several announcements were forthcoming and indicating that if trade deals were not completed, tariff rates could “boomerang” higher on August 1. Yet, others warn of complacency in the markets. Scott Wren, global market strategist at Wells Fargo Investment Institute, expressed concern that as tariff rates settle, economic slowdown and reduced consumer spending might follow.
He suggested trimming positions in overvalued market sectors. Lukman Otunuga, senior market analyst at FXTM, warned that if tariff rates rise higher than expected, it could revive recession fears and trade uncertainty, potentially causing a significant market downturn.
