Former President Donald Trump announced on Tuesday that the United States will impose a blanket 25% tariff on imports from Japan and South Korea, effective August 1. This decision is a big down payment on that seismic shift in U.S. trade policy. Specifically, it reimposes the original full-tariff rates that Trump rolled back this past spring.
Trump, known for his strong stance on tariffs and skepticism towards free trade agreements, sent letters to Japanese Prime Minister Ishiba Shigeru and South Korean President Lee Jae-myung detailing the new tariff structure. He charged unfair practices abroad with a deeply progressive agenda to expand and enforce trade rules in these letters. He pointed to the large trade deficits that the U.S. runs with each country as justification for increasing tariffs.
In 2024, the Office of the United States Trade Representative shared some alarming statistics. In fact, the U.S. faced a $68.5 billion goods deficit with Japan and a $66 billion goods deficit with South Korea. Trump contends that these examples are just the tip of the iceberg in how the US is being raked over the coals by our trade partners.
In his letter, Trump threatened both leaders with adverse consequences if they retaliated against the new tariffs. He asked them not to load down American products with their own requirements. The letters send a strong exhortative message that any such actions would be anathema.
“Tariff, and Non Tariff, Policies and Trade Barriers” – Donald Trump
Trump’s letters made clear that these blanket tariffs do not preclude the imposition of duties on specific sectors. These responsibilities would be a good start and should include the most important product categories. This new twist essentially reinstates Trump’s first tariffs. Goods from Japan would be subject to a 24% tariff, while imports from South Korea would be hit with a 25% tariff. Prior to this announcement, he rolled out a 90-day pause on April 9. This move temporarily lowered all of these tariffs to a single 10% rate.
Trump views tariffs as important tools for fixing trade imbalances. His approach to them has always been shaped by this conviction. As a candidate, he often made the case that past trade agreements have done a poor job looking out for American interests. First, the new tariffs should have sent a message. Yet, they showcase his administration’s willingness to address perceived unfairnesses in the international trade landscape.
Bizarre… Retaliation not going so well, eh? Financial markets were rattled when first Trump’s letters became public. Predictably, stocks tumbled almost immediately to session lows on the news. Market investors worried about an economic backlash coming from increased trade tensions.
Moreover, he stated that if Japan and South Korea “eliminate” their “Tariff, and Non Tariff, Policies and Trade Barriers,” then the U.S. “will, perhaps, consider an adjustment to this letter.” The signing of the symbolic statement indicates their readiness to renegotiate — only if the two countries reform their trade policies.
“You will never be disappointed with The United States of America” – Donald Trump
Moreover, he stated that if Japan and South Korea “eliminate” their “Tariff, and Non Tariff, Policies and Trade Barriers,” then the U.S. “will, perhaps, consider an adjustment to this letter.” This statement suggests a willingness to negotiate, contingent upon changes in trade policies by the two nations.