CNBC's Megan Cassella joins 'The Exchange' to discuss U.S. President Donald Trump announcing 25% tariffs on Japan and South Korea starting on August 1st.

Washington

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

Global Tariffs

US President Donald Trump has announced the imposition of 25% tariffs on all imports from Japan and South Korea to the United States, set to take effect from August 1st. The announcement was made through letters posted on Truth Social and sent to the leaders of both countries. These tariffs will be in addition to any existing or forthcoming sectoral tariffs. Trump stated that any retaliatory measures by Japan or South Korea would result in a further increase in tariff rates, but also indicated a willingness to adjust tariffs if the countries open their markets.

The tariffs reinstate reciprocal rates that had previously been discussed, with the White House having warned of such measures if trade agreements were not reached. The deadline for implementation was shifted from July 9th to August 1st, allowing more time for negotiations. While the markets have so far shown limited reaction, the situation remains uncertain as further changes to the tariffs are possible depending on ongoing trade relationships.

Trump announces 25% tariffs on Japan, South Korea starting Aug. 1st

Let's begin in Washington with the latest news on the terror front, and Megan Kostella has the details. Megan, we had heard things were a little contentious with the Japanese, which was supposed to be one of the first deals announced, and now this. Yes, now this, Kelly. The president did post overnight on Truth Social that he would start sending these letters at noon today, telling countries what their exports would face to send them into the U.S., and now, just in the last hour, we got the first of those. The president posted full letters on Truth Social that he says he sent to the leaders of Japan and South Korea. Very long letters here, but some top-line details to get into. These would be 25 percent tariffs on all Japanese and South Korean exports into the U.S., effective on August 1st, on top of any tariffs that are already in place or that are forthcoming in terms of the sectoral tariffs. He also said any retaliation would lead to a commensurate increase in the tariff rate, meaning if they retaliate, he's going to lift this tariff rate even further. Trump also said that he would consider an adjustment if countries do open their markets. And that's the key, Kelly, is that there is no certainty here. He goes on to say, hinting further, hinting at further changes, saying, quote, these tariffs may be modified upwards or downwards, depending on our relationship with your country. So interesting there that while the markets and investors have been craving certainty, they're not exactly getting it with this letter. And Kelly, the way I would sort of characterize this, even though we are seeing market reaction here, is just to remember that what this is essentially doing is kicking back in the reciprocal rates for these two countries that were announced on April 2nd. South Korea was already seeing 25 percent. Japan was at 24 percent. The White House has been threatening for weeks if they didn't strike a deal with these countries, we'd see those rates kick back in on July 9th. Now that date changes to August 1st, but otherwise everything else pretty much holds the same. So despite all the bluster in these letters, we are seeing them follow through on that threat just delaying down the road a little bit further. Kelly. It was interesting to hear the Treasury Secretary, Megan, who also talked about effectively how with a hundred countries that are too small to really affect the trade deficit that much, we may not have the capacity to even do any deals. And I wonder what that means. Yes, that's going to be interesting. That's where I think you'll just see these blanket tariffs have to take effect because there isn't enough there. There isn't enough bandwidth to sort of negotiate deals. And they have said from the beginning that they're focused on something like the top 15 to 18 largest trading partners. It would be significant if we suddenly see huge tariffs imposed on very small countries. It's headline worthy and it doesn't bode well for certainty and for the path forward. But I would also say that outside of the top 15 or 18 markets, we're not getting a ton coming in from those countries. But we would still see, you know, importers having to pay those tariffs when they do import goods from whatever the country might be. Yeah. I mean, you add it all up. We do seem to be tiptoeing back to the landscape that was initially set out for us on April 2nd. But Megan, the market's up like 15 percent since that. Yes. And that's really interesting, I think, is that so far there's been a lot of shrugging off of everything that we've seen so far. And I would say that's because things aren't in place yet. We continue to see these tariffs. And even though this looks a little bit like an escalation that he really means business, he has set these letters, they're doing it in conjunction with delaying the deadline from July 9th to August 1st. By doing that, they say it's not kicking the can down the road any further. Officials get defensive when you try to talk to them about that, but it does allow for more negotiations. So it means that even while the market is reacting today, they probably have one eye on that deadline and say this could very well change again between now and the end of the month. All right. Megan, appreciate it very much.

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Trump announces 25% tariffs on Japan, South Korea starting Aug. 1st

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