On Monday, July 7, 2025, US stock markets experienced a significant downturn following President Donald Trump's announcement of imposing a 25% tariff on goods imported from Japan and South Korea. The Dow Jones Industrial Average fell sharply, along with declines in the S&P 500 and Nasdaq Composite.

President Trump revealed his decision through letters posted on Truth Social addressed to Japanese Prime Minister Shigeru Ishiba and South Korean President Lee Jae Myung. The new tariffs are set to take effect on August 1, 2025. Trump's justification for these tariffs is the persistent trade imbalances with these two key U.S. allies in Asia. He stated that these trade deficits pose a major threat to the U.S. economy and national security.

The Dow Jones Industrial Average plunged 447 points, a 1% drop. The S&P 500 fell by 0.8%, and the Nasdaq Composite decreased by 0.9%. These declines reflect investor concerns about potential economic fallout from the newly announced trade measures. The announcement led to session lows for major averages, with declines nearing 1%.

The Japanese yen weakened nearly 1% against the dollar, becoming the weakest performer among G10 currencies. The South Korean won also declined as traders responded to the new trade policy. The euro also weakened, with the EUR/USD exchange rate dropping.

Trump's letters included a warning that any retaliatory tariff increases from Japan or South Korea would be met with equivalent increases to the proposed 25% base rate. He suggested that the tariffs "may be modified, upward or downward, depending on our relationship" with each country. However, Trump did offer an alternative, suggesting that tariff rates could be reduced to 0% if South Korean firms shift production to the U.S., promising quick manufacturing approvals.