Trump Announces New Tariffs, Sends Letters To Japan and South Korea

Washington: US President Donald Trump announced on Monday that the United States will impose 25% tariffs on imports from Japan and South Korea, effective August 1. Trump's decision has stirred escalation in trade tensions between the US and its key allies, also raising concerns about the impact on global markets. The tariffs move is part of Trump's efforts to address the trade deficits the US runs with these nations, which he believes are unfair and need to be rectified. 

According to Trump, the tariffs are necessary to address the trade deficit between the US and these countries, which he believes is unfair and needs to be rectified. In letters sent to Japanese Prime Minister Ishiba Shigeru and South Korean President Lee Jae-myung, Trump stated that the trading relationships between the US and these countries remain far from reciprocal. The letters were shared on Trump's Truth Social platform, along with screengrabs of the letters.

The tariffs will affect a range of goods imported from Japan and South Korea, although the exact details of the affected products have not been specified. US Treasury Secretary Scott Bessent clarified that the tariffs would not take effect until August 1, giving negotiators a few extra weeks to reach agreements.

However, Trump offered an alternative, saying that if Japan and South Korea decide to manufacture goods in the US, they can avoid these tariffs. "There will be no tariff" if companies within these countries choose to build or manufacture products in the US, and the administration will expedite approvals "quickly, professionally, and routinely — In other words, in a matter of weeks".

Earlier, in April, he imposed 25% ‘reciprocal’ tariffs on South Korea, citing trade imbalances and unfair practices. The tariffs targeted key South Korean exports, including automobiles, semiconductors, and petroleum products. Trump's administration argued that the tariffs were necessary to correct perceived trade disparities.

The tariffs are part of a broader trend of increasing trade tensions under Trump's presidency, with the US imposing tariffs on several major trading partners, including China, the European Union, and Vietnam. The Trump administration's move has triggered an international backlash, with affected countries considering counter-tariffs and other measures to protect their interests.

Trump's Tariff Details

The 25% tariffs will apply to imports from Japan and South Korea starting August 1, possibly giving countries more time to negotiate deals. Trump said that the 25% number is far less than what is needed to eliminate the Trade Deficit disparity between the US and these countries. 

Meanwhile, Trump's announcement has jolted the financial markets, with the Dow Jones Industrial Average plunging 447 points, or 1%, while the S&P 500 dropped 0.8% and the Nasdaq Composite slipped 0.9%. Investors are bracing for possible economic fallout as trade tensions escalate. Treasury Secretary Scott Bessent told a foreign media outlet that there would be several trade announcements over the next 48 hours, adding that he expects "it's going to be a busy couple of days".

The US had previously imposed baseline tariffs of 10% on imports from almost all countries, with some countries facing higher tariffs. The European Union, for instance, faced 20% tariffs. Trump had halted the hike in tariffs for 90 days to allow room for talks, but the deadline is approaching.

Reportedly, the US and China have temporarily agreed to lower tariffs on each other's products, but the situation remains volatile. 

Trump's Tariff Letters: Countries Affected and Rates

Following the letters to Japan and South Korea, Donald Trump signed and sent tariff letters to 12 additional countries, outlining specific tariff rates for each.

The countries receiving these letters are reportedly subject to "take it or leave it" offers with tariff rates varying from 25% to 40%, effective August 1. These countries and tariff rates announced include: 

• 25% Tariff: Japan, South Korea, Malaysia, Kazakhstan, Tunisia
• 30% Tariff: South Africa, Bosnia and Herzegovina
• 32% Tariff: Indonesia
• 35% Tariff: Bangladesh, Serbia
• 36% Tariff: Cambodia, Thailand
• 40% Tariff: Laos, Myanmar

The new tariffs are part of a broader effort by the US to overhaul its trade relationships. Trump's administration claimed these measures address long-standing trade deficits and push for more balanced deals. However, critics argued that these tariffs could strain trade ties, reshape global supply chains, and harm economies.

The imposition of tariffs has led to concerns about economic downturn and increased susceptibility to recession. Some countries, like Japan, have stated they won't easily compromise on trade terms. The deadline for trade deals is set for August 1, leaving countries scrambling to finalise agreements and avoid higher tariffs.