Stocks fall, volatility spikes after surprise trade moves
U.S. stocks dropped sharply on Monday after President Donald Trump announced sweeping new tariffs on key trade partners, including Japan, South Korea, and South Africa. The Dow fell 422 points (0.94%), while the S&P 500 and Nasdaq lost 0.79% and 0.92% respectively—marking the worst trading day in three weeks.
The selloff accelerated midday after Trump detailed 25% tariffs on Japan and South Korea, effective August 1. By the afternoon, he expanded the list to include Myanmar, Malaysia, Kazakhstan, Laos, and South Africa, with rates ranging from 25% to 40%. Letters posted on Truth Social confirmed the measures and suggested the rates could be adjusted later.
Trump also signed an executive order pushing the tariff negotiation deadline from July 9 to August 1, giving countries a final window to reach deals. Major international firms with U.S.-listed shares—including Toyota, Nissan, LG Display, and SK Telecom—fell sharply. ETFs tracking these countries’ stocks also posted their worst day since early April.
Investor sentiment shaken, bond yields climb
The unexpected scope and severity of the new tariffs rattled Wall Street. Ross Mayfield of Baird said the higher-than-expected rates triggered a market-wide reassessment. The CBOE Volatility Index spiked 8.4%, signaling heightened investor anxiety.
Bond markets reacted as well. Yields on 10-year and 30-year Treasuries rose to 4.39% and 4.92% respectively, as investors digested the implications for inflation and growth. The dollar index rose 0.3%, while the Japanese yen, South Korean won, and South African rand weakened. Gold briefly dipped before recovering 0.1%.
Analysts split on market direction
Despite the sharp drop, some analysts view the selloff as temporary. Mohit Kumar of Jefferies said the tariffs are likely being used as negotiating leverage and predicted that new trade deals would be announced soon. Treasury Secretary Scott Bessent echoed this optimism, signaling several agreements could be unveiled within 48 hours.
Others remained cautious. Wells Fargo’s Scott Wren warned that investors are too optimistic and that tariffs could drag on consumer spending and economic growth. He advised trimming positions in overheated sectors like small caps and consumer discretionary stocks.
Risks grow as tariff strategy escalates
Trump’s trade strategy has increasingly targeted countries tied to the BRICS economic bloc. On Sunday, he announced an additional 10% tariff on any nation aligning with BRICS members. With Wall Street on edge, any further tariff announcements or escalations could provoke another round of market turmoil.
While the S&P 500 and Nasdaq recently hit record highs, the Dow remains over 600 points below its all-time peak. Market watchers will closely monitor upcoming signals from the White House as the August 1 tariff deadline approaches.
