Japan, South Korea face 25% tariffs as Trump ramps up trade war in letters to 14 nations

WASHINGTON: President Donald Trump on Monday (Jul 7) began telling trade partners - from powerhouse suppliers like Japan and South Korea to minor players - that sharply higher United States tariffs will start Aug 1, marking a new phase in the trade war he launched earlier this year.

The imposition of the 25 per cent levy on US importers of all goods from key Asian allies Japan and South Korea rattled Wall Street, with the S&P 500 Index suffering its biggest drop in three weeks.

In letters so far to 14 countries, Trump hinted at opportunities for additional negotiations, even while warning that reprisals would draw a like-for-like response.

Trump said on Monday that the US would impose 25 per cent tariffs on Tunisia, Malaysia and Kazakhstan; 30 per cent on South Africa, Bosnia and Herzegovina; 32 per cent on Indonesia; 35 per cent on Serbia and Bangladesh; 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar.

"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 25 per cent that we charge," Trump said in letters, released on his Truth Social platform, to Japan and South Korea.

The higher tariffs take effect on Aug 1, and notably will not combine with previously announced sector tariffs such as those on automobiles and steel and aluminium.

That means, for instance, that Japanese vehicle tariffs will remain at 25 per cent, rather than the existing 25 per cent sector tariff climbing to 50 per cent with the new reciprocal rate as has occurred with some of Trump's tariffs.

Countries have been under pressure to conclude deals with the US after Trump in April unleashed a global trade war that has roiled financial markets and sent policymakers scrambling to protect their economies.

Trading partners got another reprieve as Trump signed an executive order on Monday extending the Wednesday deadline for negotiations to Aug 1.

Asked if the deadline was firm, Trump said: "I would say firm, but not 100 per cent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that."

Trump has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened.

The rate for South Korea is the same as Trump initially announced, while the rate for Japan is 1 point higher than first announced on Apr 2.

A week later, he capped all of the so-called reciprocal tariffs at 10 per cent until Wednesday. Only two agreements have so far been reached, with Britain and Vietnam.

Japanese Prime Minister Shigeru Ishiba said on Tuesday that some progress had been made on avoiding higher tariffs of up to 35 per cent that Trump had suggested recently.

"We have received a proposal from the US to swiftly proceed with negotiations towards the newly set Aug 1 deadline, and that, depending on Japan's response, the content of the letter could be revised," Ishiba told a meeting with Cabinet ministers to discuss Japan's strategy on the tariffs.

South Korea said it planned to step up trade talks with the US, and that exemptions or reductions in auto and steel tariffs must be included in any trade deal.

Thailand said it was confident it could get a competitive tariff similar to those on other countries.

In neighbouring Malaysia, the trade ministry said it acknowledged US concerns on trade imbalances and market access, while believing that constructive engagement and dialogue remained the best path forward.

In Indonesia, Southeast Asia's largest economy, an official said Jakarta still had room to negotiate on tariffs, and its top negotiator would meet US trade representatives in Washington.

A Bangladesh team in Washington was scheduled to have further trade talks on Wednesday, an official said.

The US is the main export market for Bangladesh's readymade garments industry, which accounts for more than 80 per cent of its export earnings and employs 4 million people.

“This is absolutely shocking news for us," Mahmud Hasan Khan, president of Bangladesh Garment Manufacturers and Exporters Association, told Reuters on Tuesday. "We were really hoping the tariffs would be somewhere between 10 to 20 per cent. This will hurt our industry badly."

South African President Cyril Ramaphosa said the 30 per cent US tariff rate was unjustified, given that 77 per cent of US goods enter South Africa with no tariffs. Ramaphosa's spokesperson said his government would continue to engage with the US.

Wendy Cutler, vice president of the Asia Society Policy Institute, said it was unfortunate Trump was hiking tariffs for two of the closest US allies, but there was still time for a breakthrough in negotiations.

"While the news is disappointing, it does not mean the game is over," Cutler said.

MARKET DROP

US stocks fell in response to Monday's news, with the S&P closing down about 0.8 per cent, although Asian share markets were mostly resilient, with Japan's Nikkei recouping early losses and South Korean stocks jumping 1.8 per cent.

"There's going to be a lot of volatility as the headlines start to emerge, as more of these letters come out, and as the negotiations really come to the fore ahead of that Aug 1 deadline," said Tapas Strickland, head of market economics at National Australia Bank.

Earlier on Monday, US Treasury Secretary Scott Bessent said he expected several trade announcements in the next 48 hours.

Only two deals have been struck so far, with Britain and Vietnam.

China has until Aug 12 to reach a deal with the White House to prevent Trump from reinstating additional import curbs after Washington and Beijing agreed in June on a tariff framework.

On Tuesday, China warned the US against reinstating tariffs on its goods, and said it could retaliate against countries striking deals with the US to cut China out of supply chains.

Vietnam and China agreed to boost trade and investment ties between the two countries during a meeting on the sidelines of the BRICS summit in Brazil, Vietnam's government said on Tuesday.

TRADING BLOCS

The European Union will not be receiving a letter setting out higher tariffs, EU sources familiar with the matter told Reuters on Monday.

The EU still aims to reach a trade deal by Jul 9 after European Commission President Ursula von der Leyen and Trump had a "good exchange", a commission spokesperson said.

It was not clear, however, whether there had been a meaningful breakthrough in talks to stave off tariff hikes on the US' largest trading partner.

The EU has been torn over whether to push for a quick and light trade deal or leverage its economic clout to negotiate a better outcome. It had already given up hopes for a comprehensive trade agreement before the July deadline.

Trump has also said he could impose a 17 per cent tariff on EU food and agriculture exports. The president also threatened leaders of developing nations in the BRICS group, who are meeting in Brazil, with an additional 10 per cent tariff if they adopt "anti-American" policies.

The group includes Brazil, Russia, India and China among others.