Stocks fell on Monday as President Donald Trump issued new trade threats and extended the country-specific tariff policies to a new August deadline, increasing broader market uncertainty at the start of the week.
The broader market sunk further in afternoon trade after Trump posted letters to social media that included moving forward with 25% tariffs on imports from countries include Japan and South Korea in August. The Dow Jones Industrial Average (NYSE: DIA) dropped over 400 points Monday, while the S&P 500 Index (NYSE: SPY) and Nasdaq Composite Index (NASDAQ: QQQ) each fell about 0.8% and 0.9%, respectively.
On Sunday, President Trump and U.S. Commerce Secretary Howard Lutnick told reporters that the broader "reciprocal" tariffs announced back in April will go into effect Aug. 1. Lutnick added that "the president is setting the rates, and the deals, right now." Trump's 90-day reprieve on the duties was set to expire this week.
Adding to the tariff woes, Trump later on Sunday threatened an additional 10% levy on any country that aligns itself with the "Anti-American policies of BRICS," referring to emerging market countries including Brazil, Russia, India and China. The nation group had criticized Trump's trade policies at its summit over the weekend, stating that they have "serious concerns about the rise of unilateral tariff and non-tariff measures which distort trade and are inconsistent with [World Trade Organization] rules."
On Monday, Trump released a series of social media posts on his platform Truth Social that included screenshots of letter outlining new tariff rates to the leaders of Japan, South Korea, Malaysia, Kazakhstan, South Africa, Laos and Myanmar. According to the letter, imports to the U.S. from Japan, South Korea, Malaysia and Kazakhstan will now face a 25% duty starting Aug. 1, while goods from South Africa will be subject to a 30% tax and imports from Laos and Myanmar will have a 40% duty.
"These tariffs may be modified, upward or downward, depending on our relationship with your Country," the letter stated, adding that "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 duty charged.
Also impacting markets, Tesla (NASDAQ: TSLA) shares were under pressure on Monday after CEO Elon Musk announced over the weekend that he plans to form a new political party called the "America Party." The billionaire said the platform will focus on "2 or 3 Senate seats and 8 to 10 House districts" to give it enough power "to serve as the deciding vote on contentious laws, ensuring that they serve the true will of the people," Musk wrote in a post on his social media platform X.
Investors are wary of Musk's political actions over the last several months, which have damaged the electric vehicle company's brand and in turn sales; Tesla shares have fallen more than 20% this year. This latest move nearly cements Musk's intention to be a more long-term political player.
"Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story," Wedbush analyst and long-term Tesla bull Dan Ives wrote in a Sunday note.
Beyond trade, market participants are looking ahead towards the potential start of the Federal Reserve's next interest rate cutting campaign. Futures traders are pricing in a slight chance a 25 basis point cut could come as soon as the end of this month, according to CME Group's FedWatch tool, while the majority of investors expect the central bank to start slashing rates at its September meeting.
Bank of America economist Aditya Bhave reiterated the firm's stance that policymakers won't touch interest rates until 2026 on Monday, pointing to the Fed's continued calls for more economic data, especially surrounding the impact of Trump's tariffs, being needed before beginning to cut rates.
"If the data stream continues to show resilience, the path of least resistance for the Fed is to remain in wait-and-see mode given upside risks to inflation," economist Aditya Bhave. "Our base case is that activity will hold up through the summer and accelerate in the fall as tariff uncertainty fades and the tailwind from fiscal kicks in. As a result, we stick to the view that the Fed won't cut this year."