Stocks Slip as Trump Threatens Tariffs on Several Trade Partners

(Bloomberg) — US equities tumbled Monday as trade fears returned in full force, with President Donald Trump set to impose 25% tariffs on Japan and South Korea, and even higher levies on South Africa and Myanmar. 

The S&P 500 Index closed down 0.8%, with nine of the 11 sectors in red and declines led by consumer discretionary and materials. The Nasdaq 100 fell 0.8%, and the Dow Jones Industrial Average slipped 0.9%. The Dow was trading just steps away from hitting a new all-time high before Monday’s retreat.  

Among individual stocks, Tesla Inc. shares fell 6.8% after Elon Musk announced the formation of a new political party, deepening his involvement in a pursuit that’s weighed on his most valuable business. 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. CoreWeave Inc. said it will buy Core Scientific Inc. in an all-stock deal worth about $9 billion.

Trump announced tariffs of 25% on goods from Japan and South Korea beginning on Aug. 1, as he moved to impose unilateral rates on countries that have not yet secured trade deals with his administration. He also announced 25% rates on Malaysia and Kazakhstan, while South Africa would see a 30% tariff and Laos and Myanmar would face a 40% levy. Also, Trump had earlier said he would impose an additional 10% tariff on any country aligning themselves with “the Anti-American policies of BRICS,” in a social media post.

Trump’s latest move effectively offers another extension to his tariff deadline — set to be formalized in an executive order signed later Monday — that pushes the looming July 9 deadline until at least the beginning of August. 

Still, market pros said the reaction in stocks were far milder compared to the moves in early April when the tariffs were initially announced because traders aren’t fully convinced that the levies will become effective.

“This is tariff triggered profit taking following last week’s record highs,” said Michael O’Rourke, chief market strategist at Jonestrading. “The market still does not believe President Trump will follow though on the Liberation Day tariff rates. The extension reinforces that thinking.”

The European Union said it’s nearing a framework trade agreement with the US after the head of the bloc’s executive arm, Ursula von der Leyen, held a call with Trump on Sunday. 

Meanwhile, treasury Secretary Scott Bessent says he’s going to be meeting with his Chinese counterpart “sometime in the next couple of weeks.”

After both S&P 500 and the Nasdaq 100 climbed to records in the past weeks, a gauge of market sentiment from Bloomberg Intelligence was approaching manic levels — a condition that, if sustained, has historically signaled slower forward returns and a shift toward more defensive market leadership. 

“The degree of drawdown is more reflective of uncertainty and confusion than the fear of Liberation Day,” said Mark Hackett, chief strategist at Nationwide. “With markets now embedding higher expectations, the reaction to news is likely to be more balanced versus the ‘glass half full’ reactions since April’s low.”

Later this week, investors will turn their focus to the meeting minutes from the Federal Reserve’s June rate decision.

“In a quiet week for economic releases, the most important will be the minutes of the Fed’s June decision,” said Bill Adams, chief economist for Comerica Bank. “They will probably reinforce that the Committee is expected to hold interest rates steady at their July decision when they met in June.” 

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