Japan, South Korea hit with 25% tariffs as Trump ramps up trade war in letters to leaders

U.S. President Donald Trump announced on Monday that significantly higher tariffs will be imposed on goods from various trade partners, starting August 1. This move marks a new phase in the trade disputes initiated earlier this year. Fourteen countries, ranging from major suppliers like Japan and South Korea to smaller exporters such as Serbia, Thailand, and Tunisia, have received letters detailing these increased U.S. tariffs. While these letters hinted at opportunities for further negotiations, they also contained stern warnings that any retaliatory measures would be met with an equivalent U.S. response.

In letters sent to Japan and South Korea, which were also shared on his Truth Social platform, Trump explicitly stated, "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." These new tariffs, which apply to U.S. importers of foreign goods, will take effect on August 1 and are distinct from previously announced sector-specific tariffs (e.g., on automobiles, steel, and aluminum). This means, for instance, that Japanese vehicle tariffs will remain at 25%, rather than increasing to 50% through a combination of existing and new reciprocal rates, as has happened with some of Trump's previous tariff impositions.

Deadlines, Negotiations, and Varied Rates
The impending August 1 deadline has intensified pressure on countries to finalize trade agreements with the U.S. since Trump launched a global trade war in April, which has caused significant volatility in financial markets and prompted policymakers worldwide to act to protect their economies. Trading partners received a brief reprieve as Trump signed an executive order on Monday, extending the previous negotiation deadline from Wednesday to August 1. Trump has maintained a degree of unpredictability regarding the outcome of months of discussions, leaving many nations hopeful of avoiding the substantial tariff hikes he has threatened.

The tariff rate for South Korea remains at 25% as initially announced by Trump, while the rate for Japan is 26%, one percentage point higher than the 25% announced on April 2. A week later, he had temporarily capped all "reciprocal tariffs" at 10% until the Wednesday deadline. Wendy Cutler, Vice President of the Asia Society Policy Institute, expressed disappointment that tariffs were being raised on two close U.S. allies but noted that "the game is not over," indicating there is still time for a breakthrough in negotiations. Trump also detailed new tariff rates for other nations: 25% for Tunisia, Malaysia, and Kazakhstan; 30% for South Africa, Bosnia and Herzegovina; 32% for Indonesia; 35% for Serbia and Bangladesh; 36% for Cambodia and Thailand; and 40% for Laos and Myanmar.

International Reactions and Market Impact
In response to the announcement, South Korea stated its intention to intensify trade talks with the U.S., viewing the August 1 implementation of a 25% tariff as effectively an extended grace period for reciprocal tariffs. South Africa's President Cyril Ramaphosa deemed the 30% U.S. tariff rate unjustified, citing that 77% of U.S. goods enter South Africa tariff-free. His spokesperson confirmed that engagement with the U.S. would continue, while the Japanese embassy in Washington had no immediate comment.

U.S. stock markets reacted negatively to the news, with the S&P 500 closing down approximately 0.8%, marking its most significant drop in three weeks. U.S.-listed shares of Japanese automotive companies also fell, with Toyota Motor down 4.0% and Honda Motor down 3.9%. The dollar strengthened against both the Japanese yen and the South Korean won. Brian Jacobsen, chief economist at Annex Wealth Management, observed that "Tariff talk has sucked the wind out of the sails of the market," describing the new offers as "take it or leave it." Earlier on Monday, U.S. Treasury Secretary Scott Bessent had anticipated several trade announcements, noting a surge in last-ditch offers from various countries.

European Union and BRICS Group Responses
The European Union, however, is not expected to receive a letter detailing higher tariffs, according to EU sources. A European Commission spokesperson indicated that the EU still aims to finalize a trade deal by Wednesday, following a "good exchange" between European Commission President Ursula von der Leyen and President Trump. The EU has been navigating internal debates on whether to pursue a swift, limited trade agreement or to leverage its economic power for a more comprehensive outcome, having already given up on a broad trade deal before the July deadline.

Beyond direct trade partners, President Trump also issued a warning to leaders of developing nations within the BRICS group, who are currently meeting in Brazil. He threatened an additional 10% tariff if they adopt "anti-American" policies. The BRICS group includes Brazil, Russia, India, and China, among other nations.