Trump cranks up tariffs again, with 25% on Japan and South Korea.

By

The Editorial Board

July 7, 2025 5:47 pm ET

President Donald Trump

President Trump sure knows how to spoil an economic mood. Three days after he signed the GOP’s big budget bill, saving the economy from a scheduled $4.5 trillion tax increase, Mr. Trump was back playing the role of Tariff Man. On Monday he announced 25% tariffs on Japan and South Korea, while adding to renewed will-he-or-won’t-he uncertainty for the U.S. economy and trading partners.

In letters to Japan’s Prime Minister and South Korea’s President, Mr. Trump huffs and puffs again about bilateral trade deficits, which he mistakenly thinks are a sign of foreign exploitation. “We must move away from these longterm, and very persistent, Trade Deficits,” he says. Hence the new 25% tariffs, starting Aug. 1. This nearly matches Mr. Trump’s paused “Liberation Day” duties on the two countries, except Japan was supposed to get only 24%.

A few other details: Mr. Trump says the 25% is on top of the existing sectoral tariffs such as those on steel. And if Japan or South Korea retaliate with tariffs on the U.S.? “Whatever the number you choose to raise them by, will be added onto the 25% that we charge,” Mr. Trump says.

Japanese and South Korean autos already pay a 25% tariff. Cars from the two countries make up about one third of auto imports, so that’s a 50% tax increase on about 15% of the U.S. car market, assuming they keep exporting here. On Monday the shares of Honda and Toyota took a beating. Ford and GM fell too.

But Mr. Trump says he’ll “consider an adjustment to this letter” if they take (unspecified) actions to open their markets. What a way to treat two close American allies and fellow democracies in China’s backyard.

The economic damage will be broad as well, given the volume of trade. The U.S. last year imported $148.4 billion in goods from Japan and $131.6 billion from South Korea. Together that was about 8.6% of total U.S. imports.

Looking through the trade data, is it easy to see how Mr. Trump’s tariffs will hurt American businesses and consumers. Imports from Japan last year included $9.9 billion in assorted industrial machines, $7.5 billion in pharmaceutical preparations, and $3.1 billion in medicinal equipment. South Korea sent over $8.5 billion in semiconductors, $7.4 billion in computer accessories, and $3.2 billion in household appliances.

If Mr. Trump slaps on 25% tariffs, some of this trade might grind to a halt. Having less competition in the market for washing machines, say, isn’t to the American homeowner’s benefit. Businesses in the U.S. that rely on highly specialized industrial machines might not have easy alternatives to Japanese and South Korean imports. Meantime, the trade ructions and uncertainty make it harder to plan and invest.

One illusion that’s bursting is that Mr. Trump is imposing tariffs in the cause of free trade. He’s imposing tariffs because he likes them as an economic policy. The U.S. average effective tariff rate when Mr. Trump took office was 2.4%, according to the Yale Budget Lab. As of last month Mr. Trump had cranked that up to 15.6%. (See the nearby chart.) How much higher does he want to go? Mr. Trump’s deadline for a deal with the European Union is supposed to be Wednesday, and he has threatened 50% tariffs.

There’s a mood of triumphalism in MAGA circles because the sky didn’t fall after Mr. Trump announced the highest tariffs in memory on April 2. But he retreated from that fiasco after a financial market panic. Mr. Trump’s tariffs on present course would take $300 billion in border taxes from the productive economy this year, and he seems bent on going higher. That’s an anti-growth tax increase, and an arbitrary one besides.

(http://www.autoadmit.com/thread.php?thread_id=5747291&forum_id=2Reputation#49080347)