President Donald Trump released the first pair his promised tariff letters – hammering Japan and South Korea for running up a trade imbalance with the US and declaring both countries will have their exports face a 25% tariff starting August 1.
Trump attacked both countries, declaring that ‘Our relationship has been, unfortunately, far from Reciprocal’ – using a trade term and capitalizing it for emphasis.
Then he brought down the hammer, declaring what the new tariff would be – although he appended some room for negotiation at the end of his note and indicated the tariffs won’t take effect until next month.
‘Starting on August 1, 2025, we will charge Korea a Tariff of only 25% on any and all Korean products sent into the United States, separate from all Sectoral Tariffs,’ Trump wrote South Korean President Lee Jae-myung.
He said the rate was ‘far less than what is needed to eliminate the Trade Deficit disparity we have with your Country,’ and said any effort to evade the tariff through transshipment would be subject to a still higher tariff.
Markets immediately dropped on the news, with the Dow Jones Industrial Average shedding 400 points, and the broader S&P 500 losing nearly a percentage point in value.
Trump concluded with another threat: ‘If for any reason you decide to raise your Tariffs, then, whatever then number you choose to rais them by, will be added onto the 25% that we charge,’ he wrote.
President Donald Trump said he has signed about a dozen different tariff letters that will go out Monday starting at noon, as markets brace for the impact of new U.S. tariffs
Trump laced the unusual letters with compliments as well as digs, calling it a privilege for the countries to get to trade with the U.S.
Trump called the letter a ‘great honor’ and said it ‘demonstrates the strength and commitment of our Trading Relationship, and the fact that the United States of America has agreed to continue working with Korea, despite having a significant Trade Deficit with your great Country.’
Trump’s letter to Japan’s PM Ishiba Shigero appeared to use identical language, inviting Japan to participated in the ‘extraordinary’ U.S. economy through trade, even as its exports are subjected to the tariff.
Both countries are key U.S. allies. The U.S. helped rebuild both economies after World War II and after the Korean War through extensive trade ties. For years U.S. consumers and companies have turned to both countries for automobiles and consumer products as well computer chips and technology vital to an array of other products.
The U.S. ran a trade deficit with Korea of $66 billion last year, according to the U.S. Trade Representatitve. That figure reflected US purchases of Korean cars, microchips. The U.S. faced a $67 billion trade deficit with Japan, the world’s fifth largest economy.
Japan already faced a 25 percent tariff on cars, auto parts, and steel, in addition to facing the 10 percent across the board tariff.
Global markets are bracing for more tariff chaos as the White House plans to release a dozen or more letters signed by President Trump telling countries what taxes must be paid when they send goods to the United States.
The talk of the letters has now overtaken much of the conversation about ‘deals,’ with Trump’s team telling various nations in writing how much must be paid. The result could hike the costs that American pay for a variety of goods.
The president wouldn’t tip off reporters to which countries would get letters but said they would be sent at some point this week, beginning on Monday.
Commerce Secretary Howard Lutnick told reporters the tariffs would go into effect on August 1.
The uncertainty comes just two days before the July 9th deadline Trump originally imposed, with the administration teasing more deals in the next 48 hours, and indicating the store is is still open for negotiations.
‘We’ve had a lot of people change their tune in terms of negotiations. So my mailbox was full last night with a lot of new offers, a lot of new proposals,’ Treasury Secretary Scott Bessent told CNBC. ‘So it’s going to be a busy couple of days,’ he added.
‘The United States is always willing to talk to everybody about everything,’ economic advisor Kevin Hassett told CBS ‘Face the Nation’ on Sunday. ‘There are deadlines, and there are things that are close, so maybe things will push back past the deadline or maybe they won’t. In the end the president is going to make that judgment.’
On April 2, Trump announced sweeping tariffs in what he heralded as ‘liberation day, implementing a base 10 percent tariff on imports. Some countries faced additional duties reaching up to 50 percent, though these country-specific tariffs were later suspended following market panic, prompting Trump to institute a 90-day pause.
During this period, Trump has secured preliminary trade agreements with the United Kingdom, China, and Vietnam, though all three deals still require further negotiation to finalize terms. Trade advisor Peter Navarro had initially set an ambitious goal of completing ’90 deals in 90 days,’ a goal that won’t be attained.
Trump hit ‘pause’ on the ‘Liberation Day’ tariffs he imposed on April 2
‘We’ve had a lot of people change their tune in terms of negotiations. So my mailbox was full last night with a lot of new offers, a lot of new proposals,’ Treasury Secretary Scott Bessent told CNBC
‘The United States is always willing to talk to everybody about everything,’ economic advisor Kevin Hassett told CBS ‘Face the Nation’ on Sunday.
U.S. stock markets opened lower early Monday amid anxiety over the looming deadline, with the S&P 500 down less than 1 percent, and the Dow Jones Industrial Average down 96 points before Trump’s first letters came out. Bond yields were mixed.
In just one of the trade matters that is up in the air, Trump reportedly threatened the European Union with a 17 percent tariff on food exports, a move that could hammer that industry.
Without a deal the EU faces a 50 percent tax on all goods going into the United States.
EU officials told the Financial Times the new food tax is an escalation between the two trading partners.
Two federal courts have struck down the tariffs that Trump imposed under the International Emergency Economic Powers Act (IEEPA) by citing a national emergency.
However, the tariffs remain in effect while legal challenges work their way through the courts.
Trump returned to Washington July 6 as his tariff deadline loomed
