On July 7, U.S. President Donald Trump issued formal letters to 14 countries announcing a new round of tariffs, including key Asian allies Japan and South Korea, both of which now face a 25% import tariff barrier. Although the implementation date has been postponed to August 1, Asian financial markets reacted sharply, with major regional currencies weakening. The Japanese yen, in particular, fell to 146.44 against the U.S. dollar — its lowest in two weeks.
Trump previously declared that a 25% tariff would be imposed on Japanese and Korean imports beginning August 1. He warned that any attempt to circumvent the tariffs through third-country routing would result in even higher punitive duties. Additionally, he stated that any retaliatory tariff hikes by Japan or South Korea — regardless of size — would be met with equivalent increases on top of the 25% base rate.
According to Reuters, at the opening of Asian markets on July 8, the yen and the Korean won came under pressure. The yen fell to 146.44 per U.S. dollar, while the won posted a mild recovery at 1,370.20 per U.S. dollar.
Nikkei Asia reported that the yen dropped roughly 1% against the dollar in New York trading following the tariff news, settling around 146, and further declined thereafter. The yen also depreciated 0.5% against the euro to a one-year low of 171.40. The Korean won fell by approximately 1%.
Aftershocks of “Liberation Day”
Although Taiwan has not yet received official tariff notification, the New Taiwan Dollar also weakened at market open on July 8, opening at NT$29.07 to the U.S. dollar, a drop of 2.2 cents. While a slight recovery followed, gains were limited.
In contrast, Japanese and South Korean equity markets remained relatively stable despite currency volatility. The Nikkei Index opened with a 45.61-point loss but turned positive around 8:44 a.m. Taipei time, climbing 228.59 points to 39,816.27, and closed the morning session up 123.61 points at 39,711.29. The KOSPI opened at 3,071.74, up 12.27 points from the previous close, and held moderate gains throughout the morning.
Nikkei Asia cited a report from Tony Sycamore of IG Australia, who stated that the modest declines in U.S. and Nikkei futures suggest this was more of an “aftershock” from the major market shift during the so-called “Liberation Day” three months ago — indicating that markets had partially priced in the tariff risk.
Wendy Cutler, Vice President of the Asia Society Policy Institute and former U.S. Deputy Trade Representative, stated that Trump’s new policy “sends a chilling message” to other countries.
She warned that this move signals a hardline U.S. stance against granting exemptions under Section 232, particularly in the automotive sector — a critical area in U.S.-Japan and U.S.-Korea trade relations.
Over Half of Japan and Korea’s Exports Affected
Reports reveal that the U.S. will impose a 25% “reciprocal tariff” on imports from Japan, South Korea, and Malaysia. The new tariffs for Malaysia and Japan are 1 percentage point higher than the rates proposed by Trump on April 2, while Korea’s remains unchanged.
Elsewhere in Asia, Myanmar and Laos face new tariffs of 40%, Thailand and Cambodia 36%, Bangladesh 35%, and Indonesia 32%. All measures take effect on August 1 (Eastern U.S. time).
Japan and South Korea were among the first countries to receive the official tariff notices. According to Capital Economics, excluding exemptions on automobiles, electronics, and pharmaceuticals, 54% of Japan’s exports to the U.S. and 46% of Korea’s will be subject to the new tariff regime.
Morgan Stanley strategist Rie Nishihara noted that the unexpectedly high tariffs would likely squeeze corporate profits in Japan. In a July 5 report, she said investors had expected tariffs to remain near the previously accepted 10% range — but the higher rates could tighten margins substantially.
