Stocks Slide as Trump’s Tariff Plans Boost Dollar: Markets Wrap

(Bloomberg) — Stocks fell from all-time highs and the dollar climbed after President Donald Trump began unveiling his tariff plans, with the US setting levies for nations such as Japan, South Korea and South Africa starting in August — triggering a selloff in their currencies.

The S&P 500 slid about 1%, with megacaps leading losses as Tesla Inc. tumbled nearly 7% after Elon Musk announced he’s formed a political party, raising concern about his company’s outlook. Treasuries dropped, with longer-dated bonds underperforming. Emerging markets got hit as Trump warned he’d add extra tariffs on countries aligning with “the Anti-American policies of BRICS.”

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Trump unveiled the first in a wave of promised letters that threaten to impose higher tariff rates on key trading partners, including levies of 25% on goods from Japan and South Korea. He also announced 25% rates on Malaysia and Kazakhstan, while South Africa would see a 30% tariff. Laos and Myanmar would face a 40% levy.

White House Press Secretary Karoline Leavitt said there would be around a dozen countries that receive notifications about their tariffs Monday directly from the president. Additional letters will be sent in the coming days, she said.

“Investors should be alert to headline risk,” said Fawad Razaqzada at City Index and Forex.com. “The scope for last-minute deals is high, but so too is the possibility of renewed trade tensions.”

“With the trade war returning to the limelight, Treasuries bear-steepened on Monday – a move that was consistent with the forward reflationary implications associated with higher tariffs,” said Ian Lyngen and Vail Hartman at BMO Capital Markets.

The strategists said that one positive to be taken away from the latest trade developments was that the higher tariffs won’t be in place during July. That means “an indirect extension” of the original 90-day pause that would expire on Wednesday.

“The outcome could certainly have been more dire for the economic outlook had the additional window of relief not been included in the latest trade-war salvo,” they noted.

The European Union is not expecting to receive a letter setting tariff rates today, according to a person familiar with those discussions. The EU is seeking to conclude a preliminary deal this week that would allow it to lock in a 10% tariff rate beyond an Aug. 1 deadline as they negotiate a permanent agreement. 

Meantime, Treasury Secretary Scott Bessent told CNBC said he expected to meet with his Chinese counterpart in the coming weeks.

So far, the US economy is holding up, hiring is healthy, and inflation has remained tame. But the Federal Reserve is wary about tariffs despite pressure from Trump to lower rates, and wants to see how they feed through to output in the next few months. 

Investors on Wednesday will parse minutes of the Fed’s June policy meeting.

The US central bank can’t assume its benchmark lending rate won’t return to zero at some point in the future, according to researchers from the Fed Banks of New York and San Francisco, who included New York Fed President John Williams.

The authors, in a blog post published Monday, found a 9% probability the federal funds rate would hit the so-called zero lower bound, or ZLB, over a seven-year horizon, with the current high level of interest-rate uncertainty contributing to that risk.

Elsewhere, oil rose as Saudi Arabia surprised customers in Asia by hiking prices for its main crude grade, a vote of confidence that the market can absorb extra OPEC barrels.

Corporate Highlights:

• CoreWeave Inc. is dropping $9 billion on the data-center operator Core Scientific Inc. in an effort to gain more direct control over the physical assets powering the artificial-intelligence boom.
• Apple Inc. appealed a €500 million ($580 million) fine from the European Union, calling the penalty “unprecedented” and the regulator’s required changes to its App Store as “unlawful.”
• Netflix Inc. was downgraded to neutral from buy at Seaport Global Securities, which cites valuation in the wake of strong gains at the streaming-video company.
• Applied Materials Inc. was downgraded at Rothschild & Co Redburn to neutral from buy on gowth risks.
• Goldman Sachs Group Inc. initiated coverage of MGM Resorts International with a sell recommendation due to the volatile Las Vegas market.
• Wells Fargo & Co. was downgraded to market perform from strong buy at Raymond James which says the stock’s “favorable fundamentals” are already reflected in its valuation.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.8% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.8%
• The Dow Jones Industrial Average fell 0.9%
• The MSCI World Index fell 0.7%
• Bloomberg Magnificent 7 Total Return Index fell 1.4%
• The Russell 2000 Index fell 1.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.5%
• The euro fell 0.5% to $1.1719
• The British pound fell 0.3% to $1.3609
• The Japanese yen fell 1.1% to 146.06 per dollar
• The South African rand fell 1.5% to 17.8357
• The Korean won fell 1.1% to 1,377.90

Cryptocurrencies

• Bitcoin fell 0.6% to $108,045
• Ether fell 0.1% to $2,543.27

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.39%
• Germany’s 10-year yield advanced four basis points to 2.64%
• Britain’s 10-year yield advanced three basis points to 4.59%

Commodities

• West Texas Intermediate crude rose 1.5% to $67.99 a barrel
• Spot gold was little changed

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