U.S. Stocks Plunge 1.05% as Trump Escalates Tariff Threats

U.S. stocks experienced a significant decline as President Donald Trump escalated tariff threats against major trading partners, including Japan and South Korea. On Monday, July 7, the Dow Jones Industrial Average lost 470 points, or 1.05%, while the S&P 500 index fell by 0.84%. The tech-focused Nasdaq Composite index also saw a decrease of 0.90%.

Trump's latest threats come despite his earlier statements suggesting that trade talks with major trading partners were progressing well. The White House had extended the deadline for these talks from July 9 to August 1, providing more time for agreements to be reached. However, Trump's recent rhetoric has raised concerns among traders about the likelihood of finalizing these trade deals by the original deadline.

Trump's threats include extending 25% tariffs on Japan and South Korea, warning them against retaliation and threatening further escalation. He cited persistent trade imbalances, with the U.S. importing significantly more than it exports, as the reason for these tariffs. Additionally, Trump threatened punitive 10% tariffs on countries with "anti-American" policies, adding to the uncertainty in the market.

The escalation in rhetoric and the extension of deadlines have led to questions about the future of trade talks with most of the U.S. trading partners. This uncertainty has contributed to the decline in U.S. stock indices, as investors remain cautious about the potential impact of these tariffs on the economy.

Meanwhile, Tesla shares sank by 7.2% as the feud between Donald Trump and Elon Musk intensified. Musk announced the creation of the "America Party," a new political party aimed at challenging Trump and the Republicans. The split between Musk and Trump is reportedly due to the recently passed budget bill, which significantly expanded the U.S. deficit and undid savings made by Musk's DOGE department. Additionally, Tesla's shares have been affected by the loss of electric vehicle tax credits in Trump's budget, making Teslas and other electric vehicles more expensive for U.S. customers.