A transfer crane unloads a container onto a truck in a shipping terminal at the Honmoku pier in Yokohama, Japan. (Kiyoshi Ota/Bloomberg)
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President Donald Trump said he’ll impose tariffs of 25% on goods from Japan and South Korea beginning Aug. 1, giving the two export powers a narrow three-week window to open their markets to American products and manufacture more in the US to avoid his unilateral levies.
The Asian nations were the first in what the president promised would be a flurry of written warnings and trade deals announced on July 7, two days before agreements are due from trading partners facing his April 2 so-called reciprocal levies.
Trump’s second-term rush to overhaul U.S. trade policies has served as a steady source of uncertainty for markets, central bankers and executives trying to game out the effect on production, inventories, hiring, inflation and consumer demand — routine planning that’s hard enough without costs like tariffs that are on one day, off the next.
Japan and South Korea’s Aug. 1 tariff rates, shared on his Truth Social platform, are in line with what he had already announced the two nations were likely to face. After a 90-day reprieve from reciprocal tariffs which initially hit Japan with a 24% rate and South Korea with a 25% levy, Trump lowered those duties to 10% to allow time for negotiations.
New media post from Donald J. Trump (TS: 07 Jul 16:19 UTC) pic.twitter.com/Yako6G0p42
— Trump Truth Social Posts On X (@TrumpTruthOnX) July 7, 2025
Neither did so successfully in the short time given, and Trump warned both against retaliation in his letters. “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by will be added onto the 25% that we charge,” Trump wrote.
He also said that the 25% rates did not include any sectoral-specific tariffs that the administration had or would separately implement on goods imported in key industries. Both Japan and South Korea are major auto exporters, and are also facing U.S. tariffs on steel.
Trump’s letters did offer them a way to meet his demands. No tariffs will be imposed if Japan or Korea, “or companies within your Country, decide to build or manufacture product within the United States and, in fact, we will do everything possible to get approvals quickly, professionally, and routinely — In other words, in a matter of weeks,” he wrote.
Following a rally to all-time highs last week, the S&P 500 Index lost 0.9%, while the Nasdaq 100 Index fell 0.8% at 12:36 p.m. in New York. The Cboe VIX Index sat near 18.10, while a gauge of expected volatility in technology stocks traded at the highest level in two weeks.
Japanese automakers’ American depository receipts fell to session lows after Trump’s announcement. Toyota ADRs fell 4.3% to session lows, while Honda’s fell 3.9% to session lows.
Japan and South Korea were the U.S.’s fifth- and seventh-largest sources of US imports of last year — accounting for almost 9% of the total.
White House officials did not say whether additional demand letters would be released July 7, or if the president still planned to announce trade deals with other nations. Treasury Secretary Scott Bessent said earlier in an interview with CNBC that he expected to “have several announcements in the next 48 hours.”
The European Union is not expecting to receive a letter setting tariff rates today, according to a person familiar with those discussions, who spoke on condition of anonymity.
Trump’s levies will help fill the Treasury’s coffers at a time when investors are worried about the nation’s mounting debt, particularly after Congress passed much of the president’s economic agenda in a $3.4 trillion tax cut and spending package last week. The dollar has slumped and longer-term borrowing costs remain elevated.
Despite Trump’s contention that foreign countries pay his tariffs directly, the burden actually falls to American importers, which must contend with tighter profit margins, weigh raising prices on consumers or seek discounts from their foreign suppliers.
Three experts from Transport Enterprise Leasing discuss strategies for buying and selling trucks amid regulatory shifts, trade tensions and economic uncertainty. Tune in above or by going to RoadSigns.ttnews.com.
“All of that new revenue is just a tax on US businesses,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, wrote in a LinkedIn post July 4.
On April 2, Trump held a Rose Garden ceremony announcing steeper levies on more than 50 trading partners ranging as high as 50% – a shock to the economic outlook that sent financial markets into a tailspin and sparked fears of a recession. A week later, he suspended those peak rates.
The negotiating tracks have been different for the U.S.’s three largest trading partners — Mexico, Canada and China. Beijing and Washington have negotiated truces that lowered tariffs on Chinese products that soared to 145% and eased export controls on key supplies. As partners in the U.S.-Mexico-Canada Agreement, the two US neighbors aren’t subject to the reciprocal tariffs and instead are trying to negotiate lower rates on sectoral levies.
Bloomberg Economics’ U.S. trade uncertainty index has come off its April peak, but it is still higher than it was when Trump was elected in November.
On top of market jitters and economic headwinds, legal challenges offer a potential check on the reciprocal tariffs, which Trump declared under executive authority known as the International Emergency Economic Powers Act, or IEEPA.
The U.S. Court of International Trade ruled on May 28 that the vast majority of Trump’s levies were issued illegally under IEEPA and ordered them blocked. A day later, an appeals court gave the Trump administration a temporary reprieve from the ruling and decided that the tariffs can remain in place until it hears the case, scheduling the arguments for July 31.
Yet the Trump administration is using another presidential power to impose tariffs – Section 232 of the Trade Expansion Act – on specific sectors so far including autos, steel and aluminum.
Other 232 sectoral cases are in the works, potentially allowing Trump to cover a wide range of U.S. imported raw materials as well as finished consumer goods should the IEEPA levies get struck down by the courts. Trump described the latest levies as “separate from all Sectoral Tariffs.”
Another friction point for Trump on tariffs is the Federal Reserve. Jerome Powell, the chair of the U.S. central bank, has held off on lowering rates this year — despite intense pressure and name-calling from Trump — in part to determine whether tariff-driven price hikes might evolve into more persistent cost-of-living pressures.
Bloomberg Economics estimates that if all reciprocal tariffs are raised to their threatened level on July 9, average duties on all U.S. imports could climb to around 20% from less than 3% before Trump’s inauguration in January. That would add to growth and inflation risks for the economy.
Between higher tariffs, oil prices and immigration restrictions in the U.S., “the bottom line is that we should see inflation move higher over the coming months,” Torsten Slok, chief economist with Apollo Global Management, wrote in a note July 6.
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