Trump's new tariff letters could put stock market optimism to the test
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Trump plans to delay tariff start to August 1 as he announces 25% levy for Japan and South Korea
President Donald Trump has once again delayed the sweeping import tax hikes he has threatened to impose on imports from nearly every single country by extending a Wednesday deadline to August 1 while he continues to push for foreign nations to enter into trade negotiations with him and his administration. White House Press Secretary Karoline Leavitt on Monday told reporters that Trump would sign an executive order delaying the new taxes by three and a half weeks along with letters to a dozen foreign leaders threatening specific import tax rates unless countries take as-yet unspecified actions to reduce trade deficits. 'The President will also sign an executive order today delaying the July 9 deadline to August 1 so the reciprocal tariff rate, or these new rates that will be provided in this correspondence to these foreign leaders will be going out the door within the next month, or deals will be made, and those countries continue to negotiate with the United States,' she said. 'We've seen a lot of positive developments in the right direction, but the administration, the President and his trade team, want to cut the best deals for the American people and the American worker, that's what they're focused on.' The announcement that Trump would once again delay implementing new import taxes on almost every American trading partner came just one hour after he told the Japanese and South Korean heads of government that he will force Americans to pay a 25 percent import tax on all goods imported from their countries starting August 1. In a pair of letters addressed to Japanese Prime Minister Ishiba Shigeru and South Korean President Lee Jae-myung, Trump falsely claimed that the United States would 'charge each country a tariff of only 25 percent' on 'any and all ... products sent into the United States, separate from all Sectoral Tariffs.' Trump also released similar letters to heads of state or government in Burma, Cambodia, Kazakstan, Laos, Malaysia, Thailand, Tunisia and South Africa, in which he threatened to tax imports from those countries at rates ranging from 25 percent to 'only 40 percent,' citing trade deficits with each nation. The president described his threatening letter as an invitation for each country, already an important ally and trading partner for America, to 'participate in the extraordinary Economy of the United States, the Number One Market in the World, by far.' 'We have had years to discuss our Trading Relationship ... and have concluded that we must move away from these longterm, and very persistent, Trade Deficits engendered by ... Tariff, and Non Tariff, Policies and Trade Barriers. Our relationship has been, unfortunately, far from Reciprocal,' Trump said. Trump frequently claims tariffs are paid by foreign governments, even though they are import taxes charged by the federal government and paid by importers who often pass them along to consumers in higher prices. The president added that any retaliatory tariffs imposed by either government would result in equal amounts added to the import taxes paid by Americans. The president claimed that the 25 percent being charged on Japanese and South Korean imports is 'far less than what is needed to eliminate the Trade Deficit disparity we have with your Country' and suggested that both governments — or companies in both countries — could avoid having their products taxed by deciding to 'build or manufacture product within the United States.' He added that his administration would do 'everything possible to get approvals quickly, professionally, and routinely — In other words, in a matter of weeks' to allow companies to build facilities for manufacturing within the U.S. even though that process and the investment required to do so often takes years. 'Please understand that these Tariffs are necessary to correct the many years of ... Tariff, and Non Tariff, Policies and Trade Barriers, causing these unsustainable Trade Deficits against the United States. This Deficit is a major threat to our Economy and, indeed, our National Security!' he said. Trump also claimed that he might revisit the 25 percent tax if either country would 'open your heretofore closed Trading Markets to the United States, and eliminate your Tariff, and Non Tariff, Policies and Trade Barriers.' 'These Tariffs may be modified, upward or downward, depending on our relationship with your Country. You will never be disappointed with The United States of America,' he added. Trump's announcement comes just days before what had been a July 9 deadlines for countries to enter into agreements with his administration that would avoid the outsized 'liberation day' import taxes he announced in April before backing down and extending the initial deadline for imposing them after markets reacted poorly to his attempt to upend the global trading system. The 25 percent taxes are similar to what Trump had planned to impose as part of that initial package of taxes and are far higher than what Japanese and South Korean negotiators have pressed for in talks with the administration. American stock markets lost ground in trading on Monday after the president's announcement, with the S&P 500 index falling 0.9 percent in the first day of trading in the U.S. after a holiday-shortened week, while the Dow Jones Industrial Average was down 526 points, or 1.2 percent, as of midday. The Nasdaq composite was 1 percent lower as well.
