On the 7th (local time), all three major indices on the New York Stock Exchange recorded their largest decline in nearly three weeks. The announcement by President Donald Trump to impose reciprocal tariffs on Korea, Japan, and others was a major factor in the decline.
The Dow Jones Industrial Average ended the day at 44,406.36, down 422.17 points (0.94%) from the previous transaction.
The S&P 500 index recorded a decline of 49.37 points (0.79%) to close at 6,229.98.
The Nasdaq Composite Index, which is technology-focused, closed down 188.59 points (0.92%) at 20,412.52.
On this day, President Trump announced plans to impose a 25% tariff on Japan and Korea. This will take effect from August 1. He also stated that various tariff rates ranging from 25% to 40% would be applied to Myanmar, Malaysia, Kazakhstan, Laos, and South Africa.
President Trump posted a letter regarding the tariffs on Truth Social. The letter specified that the tariff rates 'may be adjusted upward or downward.' This is a separate measure from sector-specific tariffs.
During the day, the stock market started lower as it became known that the Trump administration planned to notify new tariff rates. President Trump said the day before that the White House would send a 'tariff letter' to each country at noon on Monday.
Caroline Levitt, White House spokesperson, explained that the president would sign an executive order postponing the July 9 tariff deadline to August 1, creating a schedule for negotiations.
During the day, major corporations in countries subject to the tariffs saw their stock prices drop significantly.
U.S.-listed Japanese automakers were hit hard. Toyota fell 4%, Nissan dropped 7.16%, and Honda declined 3.86%.
Exchange-traded funds (ETFs) managed by BlackRock also fell. The Japan-tracking ETF declined 2.4%, the Korea-tracking ETF dropped 3.56%, the South Africa-tracking ETF decreased by 1.73%, and the Malaysia-tracking ETF fell 1.97%.
Japan, Korea, and Malaysia tracking ETFs recorded their largest drop since early April.
As the news of the tariffs was digested, U.S. government bonds also fell. The yield on the 10-year Treasury rose to 4.39%, and the 30-year yield climbed to 4.92%. Yields and prices move in opposite directions.
The dollar index, which indicates the strength of the dollar against six major foreign currencies, rose by 0.3%. The Japanese yen, Korean won, and South African rand all showed weakness against the dollar.
The CBOE Volatility Index (VIX), known as Wall Street's fear gauge, surged by 8.4%. Gold prices closed up 0.1% after lower earlier in the morning.
Ross Mayfield, an investment strategist at Baird, analyzed to CNN that 'the presented tariff rate was higher than market expectations, leading to a massive sell-off.'
Mohit Kumar, chief strategist for Jefferies in Europe, noted that 'the fact that the 9th is the deadline in itself will not have a significant impact on the market' and said, 'This letter will act as a catalyst for other countries to quickly reach an agreement on negotiations, leading to more trade agreements being made in the coming weeks.'
Secretary of the Treasury Scott Bensinger told CNBC that 'several announcements are expected within the next 48 hours.' Secretary Bensinger had mentioned to CNN the day before that if trade agreements are not finalized, the tariff rates would rise 'like a boomerang' on August 1.
President Trump announced the day before that he would impose an additional 10% tariff on BRICS member countries, including Brazil, Russia, India, China, and South Africa.
Jim Baird, chief investment officer of Plantemoron Financial Advisors, said, 'If there's anything we've learned in the last three months, it's that the situation is very fluid and can change with little notice.'
Scott Ren, a global market strategist at Wells Fargo Investment Institute, pointed out that 'the Wall Street consensus is overly optimistic about the tariff outlook' and expressed concerns that 'as the tariff rate is set, the economy may start to slow, and consumer expenditures may contract.'