Stocks fall, dollar up as Trump plans 25% tariffs on Japan, South Korea

Major stock indexes declined while the dollar strengthened against major currencies on Monday as President Donald Trump unveiled 25per cent tariffs on goods from Japan and South Korea and investors awaited further announcements in the White House's trade negotiations.

Longer-dated US Treasury yields edged higher.

Trump said on Monday the US would impose a 25per cent tariff on imports from Japan and South Korea beginning August 1 as he unveiled the first two of what he has said will be a wave of letters to trading partners outlining the new levies they face.

US-listed shares of Japanese automotive companies fell, with Toyota Motor down 4.1per cent and Honda Motor off by 3.8per cent.

 

The United States will make several trade announcements in the next 48 hours, Treasury Secretary Scott Bessent said earlier on Monday, with a deadline set for Wednesday to get trade deals done.

"We're down (in stocks) after the long weekend, and it's somewhat of a critical week in terms of the tariffs," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"The prospect of what may or may not happen with the trade deals... is causing investors to be somewhat cautious."

Tariffs are expected to increase prices and to slow down growth, though uncertainty over the ultimate policies may be a bigger drag as it leads businesses to postpone decisions.

S&P 500 companies are soon expected to begin reporting results on the second quarter.

Trump announced in April a 10per cent base tariff rate on most countries and higher "reciprocal" rates ranging up to 50per cent, with an original deadline of this Wednesday.

However, he also said levies could range in value from "maybe 60per cent or 70per cent," and threatened an extra 10per cent on countries aligning themselves with the "anti-American policies" of the BRICS group of Brazil, Russia, India and China.

The Dow Jones Industrial Average fell 515.77 points, or 1.15per cent, to 44,314.92, the S&P 500 fell 56.23 points, or 0.90per cent, to 6,222.20 and the Nasdaq Composite fell 195.58 points, or 0.97per cent, to 20,404.31.

Electric vehicle maker Tesla shares were down 7.4per cent after CEO Elon Musk announced the formation of a US political party named the "American Party."

MSCI's gauge of stocks across the globe fell 7.06 points, or 0.76per cent, to 918.65. The pan-European STOXX 600 index closed up 0.44per cent.

The yield on benchmark US 10-year notes rose 5.1 basis points to 4.391per cent, from 4.34per cent late on Thursday.

The dollar index, which measures the greenback against a basket of currencies, rose 0.58per cent to 97.53, with the euro down 0.59per cent at $1.1709. Against the Japanese yen, the dollar strengthened 1.04per cent to 146.02.

Minutes of the last Federal Reserve meeting are also due this week. Investors are weighing how many times the Fed is likely to cut interest rates this year after jobs data for June on Thursday showed that employers added more jobs than economists had forecast.

The Reserve Bank of Australia is widely expected to cut its rates by a quarter point to 3.60per cent at a meeting on Tuesday, the third easing this cycle, and markets imply an eventual destination for rates of 2.85per cent or 3.10per cent.

US crude rose 0.7per cent to $67.47 a barrel and Brent rose to $69.21 per barrel, up 1.33per cent on the day.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Lawrence White in London and Wayne Cole in Sydney; Editing by Himani Sarkar, Aidan Lewis, Rachna Uppal, Deepa Babington and Cynthia Osterman)