The U.S. dollar is notching its strongest one-day gain against the Japanese yen in nearly two months as traders react to President Donald Trump‘s sweeping new tariffs targeting multiple U.S. trading partners.
Starting Aug. 1, all goods imported from Japan and other Asian trading partners will face a 25% tariff, Trump announced Monday, citing persistent trade imbalances and unfair practices.
The move follows a 90-day pause for negotiations that fell short of providing a better outcome than the “Liberation Day” duties on April 2. And now, the fallout is landing hard.
The dollar surged past 146 yen, gaining 1.2% on the day—its sharpest move since May 12.
Markets Shake As White House Sends Tariff Letters To Trading Partners
In an official letter to Japanese Prime Minister Fumio Kishida, Trump stated that the new tariffs aim to address what he called “years of Japan’s tariff and non-tariff policies and trade barriers.”
He also warned that any retaliatory tariffs would be met with proportional increases by the U.S. and said transshipped goods would face higher rates.
He also offered an out: Japanese companies that move production to the U.S. won’t face tariffs — and he promised quick approvals for those who do.
According to International Trade Statistics data, U.S. imports from Japan totaled $152.07 billion in 2024, with vehicles accounting for $51.27 billion and machinery, including nuclear reactors and boilers, adding another $36.05 billion.
The White House stated that the tariff levels could be revised based on bilateral trade relationships, with the goal of reducing trade deficits and protecting U.S. national security.
More Countries Face Tariff Hikes
South Korea will also face a 25% tariff starting in August under the same terms as Japan. The dollar gained 0.9% against the Korean won in the session, reinforcing the greenback’s strength amid heightened global tensions.
Several other countries were also named in the tariff list, including:
- Malaysia: 25% tariff
- South Africa: 30% tariff;
- Kazakhstan: 25% tariff,
- Laos and Myanmar: 40% tariffs
ETFs Took A Beating
Country-focused ETFs sold off hard on Monday:
- The iShares MSCI Japan ETF EWJ dropped 2.3%, marking its worst session since April 10. That’s a sharp reversal after a 25% rally off spring lows.
- The iShares MSCI South Korea ETF EWY plunged 3.5%, also its worst day since early April.
- The iShares MSCI Malaysia ETF EWM fell 2%.
- The iShares MSCI South Africa ETF EZA dropped 2%.
What’s Next?
The White House said tariffs could still be adjusted — higher or lower — depending on “the strength of the relationship” with each country.
Investors are now watching closely to see how Japan, South Korea, and others respond — and whether the European Union, facing a similar deadline this week, becomes the next target in Trump’s escalating trade war.
Meanwhile, the message from markets is clear: tariffs are back in play, and traders are bracing for more volatility ahead.
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