President Sends First Letters To Japan And South Korea

Topline

President Donald Trump shared letters Monday informing governments in Japan and South Korea that he’s levying 25% tariffs on their imports to the U.S., the first in an anticipated slew of tariff notices the administration is expected to send out before its self-imposed tariff pause ends Wednesday—though the letter suggests the rates could still change again.

President Donald Trump arrives for a rally at the Iowa State Fairgrounds on July 3 in Des Moines, … More Iowa.

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Key Facts

Trump posted two nearly identical letters on his Truth Social account, which were addressed to Japanese Prime Minister Ishiba Shigeru and South Korean President Lee Jae-myung, informing them the Trump administration will start charging a 25% tariff on their imports starting Aug. 1.

The letters say the 25% tariffs will be on top of any sector-specific tariffs the U.S. levies—such as those on steel—and that they could change in the future, saying the Trump administration will raise its tariffs if Japan or South Korea impose retaliatory tariffs on U.S. goods, and the administration will conversely “perhaps consider an adjustment to this letter” if the countries instead eliminate their tariffs and trade barriers on U.S. goods.

South Korea’s 25% tariff rate is the same rate that Trump initially levied on the country’s goods during his April 2 “Liberation Day” announcement—which has been temporarily lowered to 10%—while Japan’s rate is one percent higher than the 24% tariffs Trump initially imposed on the country’s goods.

The letters both are instances of Trump imposing new tariff rates on the countries without reaching a formal trade agreement, informing Japan and South Korea that their trading relationships with the U.S. have been “far from reciprocal.”

The Trump administration is expected to send many more letters to other countries in the coming days imposing new tariff rates, before the initial 90-day pause on Trump’s “Liberation Day” tariffs ends Wednesday.

How Did Stocks React To The Tariffs?

Stocks slightly fell Monday in response to Trump sharing his letters to Japan and South Korea, with losses steepening immediately after the announcement. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all down about 1% as of early Monday afternoon, while stocks of Japanese automakers Toyota and Honda had bigger slides, dropping by 4%.

Crucial Quote

“These Tariffs may be modified, upward or downward, depending on our relationship with your Country,” Trump said in his letters to the Japanese and South Korean leaders.

What To Watch For

The 90-day pause on Trump’s “Liberation Day” tariffs will expire at 12:01 a.m. Wednesday, and administration officials have suggested they plan to issue many more letters or reach trade deals before the pause is up. It’s still unclear when any new tariff rates will actually go into effect, however: the administration has broadly suggested Aug. 1 is the new date for tariffs to take effect, as Trump said in his letters Monday, but it’s unclear what will happen for any countries that have not received letters or reached trade deals with the U.S. by Wednesday.

What Other Countries Could Get Letters Or Reach Deals Next?

The Trump administration has not given any specifics on which countries it will prioritize for sending letters to or reaching trade deals with before the Wednesday deadline. The European Union has expressed confidence in recent days it will reach some sort of trade agreement with the U.S. before the deadline, with EU trade spokesperson Olof Gill saying Monday, “We’re fully geared up to get an agreement in principle by Wednesday, and we’re firing on all cylinders to that effect.” Thailand has also offered concessions to the U.S. in order to avoid a 36% tariff rate, Bloomberg reported Sunday, and negotiations reportedly still remain ongoing with countries including India, Indonesia and Switzerland.

Key Background

Trump’s “Liberation Day” tariffs have been a major source of controversy since the president first imposed them in early April, over concerns from economists that doing so would raise prices for U.S. consumers and harm the economy. The president imposed sweeping tariffs on nearly all countries that ranged from 10% to 50%, but paused the worst of the tariffs a week later, after the tariff announcement caused the stock market to plunge and sparked fears of a recession. Trump officials vowed to use the 90-day pause to aggressively reach trade deals with foreign countries—predicting they’d make “90 deals in 90 days”—but as of Monday morning, the U.S. had so far only reached formal agreements with the U.K., Vietnam and China. Trump’s letters to South Korea and Japan come after he has now been teasing for weeks that his administration would simply send out letters imposing new tariff rates if formal deals can’t be reached. The president previously suggested letters would start being sent last Friday, but when that date passed without any notices being announced, Trump then said Sunday evening the letters would begin rolling out Monday afternoon.