US Markets Plummet as Trump Announces New Tariffs on Major Trading Partners

On July 7, 2025, U.S. stock markets experienced significant declines following President Donald Trump’s announcement of new tariffs targeting major trading partners, including Japan and South Korea. The S&P 500 fell by 1.2%, the Dow Jones Industrial Average dropped 641 points (1.4%), and the Nasdaq Composite decreased by 1.3%.

President Trump declared a 25% tariff on imports from Japan and South Korea, set to take effect on August 1. He communicated this decision through letters addressed to the leaders of both nations, which were also shared publicly on his social media platform, Truth Social. In these letters, Trump demanded that the targeted nations open their markets to American goods and remove existing tariff and non-tariff barriers, hinting at possible revisions if these demands are met. He also warned of potential further escalation if countries retaliate against the tariffs.

The administration also announced tariffs on other nations: 25% on Malaysia and Kazakhstan, 30% on South Africa, and 40% on Laos and Myanmar. These measures were justified by the administration as responses to trade imbalances and to promote domestic manufacturing. Additionally, President Trump threatened an additional 10% tariff on countries aligning with BRICS policies he deemed "anti-American." This move was particularly aimed at BRICS' efforts to challenge the dominance of the U.S. dollar through alternative currency proposals.

The stock market responded negatively to these announcements. The S&P 500 declined by nearly 1%, the Dow Jones Industrial Average dropped 641 points, a 1.4% decrease, and the Nasdaq Composite decreased by 1.3%. These declines were driven by investor concerns over escalating trade tensions and potential retaliatory measures from affected countries.

International responses were swift. The South African rand fell by approximately 1% against the U.S. dollar following the tariff threats. The country's benchmark 2035 government bond yield rose by 9 basis points to 9.83%. Brazilian President Luiz Inácio Lula da Silva criticized the U.S. tariffs, stating it was "irresponsible" to threaten countries with tariffs via social media. He emphasized that BRICS does not intend to confront any nation.

These tariff announcements are part of President Trump's broader strategy to address trade imbalances and promote domestic manufacturing. Earlier in 2025, the administration imposed broad-based tariffs under the "Liberation Day" initiative, which led to significant market volatility and legal challenges. On May 28, 2025, the United States Court of International Trade ruled that these tariffs exceeded the authority granted under the International Emergency Economic Powers Act (IEEPA), leading to a permanent injunction against their enforcement.

In response to concerns over the executive branch's unilateral trade actions, the Trade Review Act of 2025 was introduced in Congress. This bipartisan bill aims to reassert Congressional authority over trade policy decisions, requiring the President to notify Congress of any new tariffs and obtain approval for them to remain in effect beyond 60 days.

The new tariffs could lead to higher prices for imported goods, contributing to inflationary pressures. Industries reliant on imports from the affected countries may face increased costs, potentially leading to job losses or reduced profitability. The tariffs risk straining relationships with key allies such as Japan and South Korea, which are integral partners in sectors like semiconductors and energy. Retaliatory measures from these countries could further escalate trade tensions. Targeting BRICS nations and countries aligning with their policies may push these nations closer together, potentially leading to the formation of trade blocs that exclude the United States, thereby altering global trade dynamics.

The administration's recent tariff announcements have introduced significant uncertainty into global markets and international relations. As investors and policymakers await further developments, the potential for escalating trade disputes underscores the need for careful consideration of the broader economic and diplomatic implications of such unilateral actions.