WASHINGTON — President Trump warned the leaders of Japan and South Korea on Monday that they’d face 25% “reciprocal” tariffs starting Aug. 1 — with the option of no tariffs should each country choose to “build or manufacture product within the United States.”
Tokyo and Seoul were staring down the threat of 24% and 25% tariffs, respectively, before the president fired off the letters Monday.
“Please understand that the 25% is far less than what is needed to eliminate the Trade Deficit disparity we have with your Country,” Trump wrote to the leaders of each country.
“If for any reason you decide to raise your Tariffs,” he added, “then, whatever the number you choose to raise them by, will be added onto the 25% that we charge.”
The announcement caused a midday slump in stock trading, as the Dow Jones Industrial Average dropped 526 points, or 1.2%, as of 12:22 p.m. EST.
The Nasdaq fell an additional 1%, while the S&P 500 dipped 0.9%.
Trump first revealed the sweeping “reciprocal” rates for global trading partners after applying 10% duties globally April 2.
Seven days later, he declared a 90-day pause on those rates to pursue negotiations before imposing the levies, roughly correlated by the Council of Economic Advisers to halve current US trade deficits with each country.
With only the UK, China and Vietnam so far having brokered deals, Trump threatened Friday to go as high as 70% with some nations holding out on tariff agreements.
Pending any last-minute trade deals, import taxes will be slapped Tuesday on Cambodia (49%), Laos (48%), Madagascar (47%), Sri Lanka (44%), Bangladesh (37%), Indonesia (32%) and Pakistan (29%).
The UK trade agreement, if finalized, will keep 10% baseline tariffs on most goods, while exempting most British-made cars, steel and aluminum from 25% levies that had been announced separately.
The US-China arrangement is still being ironed out before Aug. 10 to avoid snapback rates to 145% on the American side and 125% on the Chinese side.
The Vietnam deal includes a baseline 20% tariff rate as well as 40% on goods “transshipped” from China or other countries.
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Under the USMCA trade deal from Trump’s first term, goods from Canada and Mexico have evaded higher duties, though 25% tariffs were added on items not previously part of that agreement.
Japan remains one of the few top US trading partners to not having reached a preliminary agreement on tariffs — along with the European Union, which currently risks a 50% rate.
“As we get to the smaller countries, we’re pretty much going to keep the tariffs the same,” Trump told reporters Friday.
“They’ll start to pay on Aug. 1. The money will start to come into the United States on Aug. 1 in pretty much all cases.”
Critics have predicted that American consumers will bear the brunt of the attempted trade realignment due to the price of goods surging, while Trump administration officials have touted the benefit of increased Treasury revenue.
As with the agreement with Vietnam, Monday’s letters to Japan and South Korea cautioned that “goods transshipped to evade a higher Tariff will be subject to that higher Tariff.”
“These Tariffs may be modified, upward or downward, depending on our relationship with your Country.”
