Photo: Bloomberg

Wall Street Hit by Sudden Tariff Escalation

U.S. stock markets tumbled Monday after President Donald Trump announced a sweeping new round of tariffs targeting multiple trading partners, including Japan, South Korea, Malaysia, and South Africa. The decision triggered the worst single-day drop in nearly three weeks across major indexes.

• Dow Jones Industrial Average: Fell 422 points (–0.94%)
• S&P 500: Dropped 0.79%
• Nasdaq Composite: Down 0.92%

This decline came just as markets were regaining confidence following a recent rally to record highs, driven by stronger-than-expected economic data and easing fears over Trump’s earlier tariff threats.

What Prompted the Selloff?

The selloff began after Trump issued formal letters—shared on Truth Social—outlining 25% tariffs on Japan and South Korea effective August 1. By afternoon, more countries were added to the list, including Myanmar, Kazakhstan, Laos, and South Africa, with varying tariff rates between 25% and 40%.

The sudden policy move surprised investors and confirmed Trump’s strategy of leveraging tariffs to push bilateral trade deals. The letters noted that rates “may be modified, upward or downward,” introducing additional ambiguity for investors.

White House Press Secretary Karoline Leavitt later confirmed that Trump signed an executive order delaying the original July 9 deadline to August 1, effectively extending negotiations with dozens of nations.

Global Stock Impact: Automakers and Tech Firms Drop

The immediate fallout was felt across sectors exposed to international trade:

• Toyota: –4%
• Nissan: –7.16%
• Honda: –3.86%
• LG Display: –8.3%
• SK Telecom: –7.76%

Exchange-Traded Funds (ETFs) tracking regional indexes also slumped:

• iShares MSCI Japan ETF: –2.4%
• iShares MSCI South Korea ETF: –3.56%
• Malaysia ETF: –1.97%
• South Africa ETF: –1.73%

These were the sharpest declines for some of these funds since early April.

Bonds, Currencies React

The bond market wasn’t spared either:

• 10-year Treasury yield: Rose to 4.39%
• 30-year yield: Climbed to 4.92%

As is typical during uncertainty, the U.S. dollar index gained 0.3%, while the yen, won, and rand weakened against the greenback.

Asia Shrugs Off the Shock — For Now

Despite the news, Asian equities opened relatively flat or slightly positive on Tuesday:

• Nikkei 225 (Japan): +0.5%
• Kospi (South Korea): +1.5%
• Hang Seng (Hong Kong): +0.3%
• S&P/ASX 200 (Australia): +0.1%

Kai Wang, Asia equity strategist at Morningstar, called the reaction “more measured,” saying markets were viewing the tariffs as posturing rather than concrete policy shifts. The new August 1 deadline is seen as a window for deals, not a line in the sand.

Can the Bull Market Hold?

Just two weeks ago, the S&P 500 notched four record highs since June 27, fueled by optimism that the tariff chaos was behind. But Monday’s reversal highlights how quickly sentiment can shift.

Brian Belski of BMO Capital Markets noted that inflation data and economic strength had eased concerns, but uncertainty still looms. Jefferies’ Mohit Kumar believes this dip is a buying opportunity, anticipating trade deals in the coming weeks.

Still, not everyone is as confident.

Scott Wren of Wells Fargo warned that markets may be underestimating the risk. "We believe stocks are ahead of themselves," he wrote, citing inflated valuations in small caps and consumer discretionary sectors.

Tariff Risks Expand with BRICS Threat

Adding another layer of concern, Trump also announced a 10% tariff on any country aligning with the BRICS bloc — which includes Brazil, Russia, India, China, and South Africa — escalating tensions with key global economies.

Looking Ahead: A Market on Edge

The next few weeks will be critical as investors watch for:

• New tariff announcements
• Progress (or lack thereof) in bilateral trade talks
• August 1 implementation—or further delays

Lukman Otunuga at FXTM warned that a sharp hike in tariff rates could revive recession fears and hammer stocks while driving investors to safe havens like gold and bonds.

Jim Baird of Plante Moran summed it up: “The situation is very fluid and can change with very little notice.”

For now, traders are bracing for a volatile summer as tariff policy once again becomes the central theme on Wall Street.