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Investing.com-- The S&P 500 closed sharply lower Monday after President Donald Trump announced a slew of tariffs including a 25% levy on Japan goods, reigniting fears of a worldwide trade war that could the put the global economy in the crosshairs.
At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average fell 422 points, or 0.9%, the S&P 500 index dropped 0.8%, and the NASDAQ Composite slipped 0.9%.
The main averages were closed on Friday for the Independence Day holiday, but the S&P 500 and Nasdaq Composite both posted record closing levels on Thursday.
Trump announces slew of tariffs, 25% levy on Japan, South Korea
Trump announced a 25% tariff on goods from South Korea and Japan starting Aug. 1, citing the need to correct for long-standing U.S. trade deficits with the two countries. As of 2024, the goods deficit with Japan stood at $68.5 billion, $66 billion goods deficit with South Korea, according to the Office of the United States Trade Representative.
The president also threaten to escalate tariffs should the two countries retaliate, saying "whatever the number" Japan or South Korea chooses to raise them by, the U.S. would match and add it onto the 25%.
Trump also announced higher tariffs on several other countries including Myanmar, Laos, South Africa, Malaysia, Kazakhstan.
The move comes as the expiration of a pause to Trump’s heightened reciprocal tariffs is drawing close, and trade talks having only yielded preliminary deals with the United Kingdom (TADAWUL:4280) and Vietnam, as well as a trade truce with China.
That said, the United States will make several trade announcements in the next 48 hours, Treasury Secretary Scott Bessent said on Monday, ahead of a U.S. deadline on Wednesday to finalize trade pacts.
"We’ve had a lot of people change their tune in terms of negotiations. So my mailbox was full last night with a lot of new offers, a lot of new proposals," Bessent said in an interview with CNBC. "So it’s going to be a busy couple of days."
President Donald Trump said the United States would start delivering tariff letters on Monday outlining their new tariff rates, although some confusion has surrounded when the levies would come into effect, with media reports suggesting that rates may not kick in until August 1.
Markets are also uncertain over just how high Trump’s tariffs will be, given that the president in early-April announced tariffs going as high as 50% on major economies, while he also said over the weekend that the rates could reach 60% or 70%.
Adding to the uncertainty, Trump also said that countries aligned with the BRICS bloc will face an extra levy over allegedly anti-American practices.
Trump has repeatedly criticized the bloc, which consists of founding members Brazil, Russia, India, China, and South Africa, over its efforts to develop new trade alternatives to the United States.
Fed minutes due Wednesday
There’s little on the economic data slate Monday, and so eyes are likely to turn to the release of the minutes of the latest Federal Reserve policy meeting on Wednesday, with investors keen for more insight into how policymakers see interest rates evolving over the rest of the year.
At its gathering in June, the U.S. central bank chose to leave borrowing costs unchanged at a target range of 4.25% to 4.5%, arguing that a wait-and-see approach continued to be appropriate as more clarity emerged around the impact of Trump’s tariffs on the broader economy.
Tesla loses $68B in value after Musk launches political party
Tesla (NASDAQ:TSLA) shares fell sharply, losing $68B in market cap, after CEO Elon Musk said he will launch a new political party, as investors fear that the move will likely further divert his attention away from the company.
Brokerage firm Wedbush warned in a Sunday note that Musk diving deeper into politics is “exactly the opposite direction” that Tesla investors and shareholders want from the CEO, especially as the electric car company grapples with declining sales and prepares a pivot into autonomous vehicles.
Musk’s announcement of the “America Party” also comes amid a bitter public feud between the Tesla CEO and U.S. President Donald Trump, especially over the recently-approved “Big Beautiful Bill.”
Elsewhere, Kalvista Pharmaceuticals (NASDAQ:KALV) stock soared after the company said the U.S. Food and Drug Administration has approved its drug, the first on-demand oral treatment for a type of hereditary swelling disorder.
Correctional institutions Geo Group (NYSE:GEO) and CoreCivic (NYSE:CXW) both gained after the passing of Trump’s tax-and-spending bill, which significantly increases funding for immigrant detention.
Stellantis (NYSE:STLA) stock fell after the U.S. National Highway Traffic Safety Administration opened a recall query covering about 1.2 million of the auto giant’s Ram trucks over concerns related to the transmission.
Peter Nurse, Ambar Warrick contributed to this article