U.S. stocks were down as Trump continues to escalate tariff threats, this time against Japan and South Korea.

Major U.S. stock indices fell as President Donald Trump threatened tariffs on major US trading partners. On Monday, July 7, Dow Jones lost 470 points or 1.05%, while the S&P 500 was down 0.84%. The tech-focused Nasdaq Composite was down 0.90%.

Markets were focusing on Trump’s latest threats on trade, stating that he would extend 25% tariffs on Japan and South Korea. He also warned them against the retaliation, citing that he would further escalate. Trump blamed the two countries for persistent trade imbalances, with the U.S. importing much more than it exported.

This escalation in rhetoric comes despite Trump’s earlier statements suggesting that trade talks with major trading partners are proceeding well. The White House also extended the deadline for trade talks from July 9 to August 1, giving its trading partners more time to agree to deals. At the same time, Trump also threatened punitive 10% tariffs to countries that have “anti-American” policies.

The extension of the deadlines and the escalation in rhetoric are causing some traders to question whether the trade talks with most of the U.S. trading partners will be finalized by July 9.

Tesla shares sink as Musk breaks with Trump again

At the same time, shares of Tesla were sinking 7.2% as the feud between Donald Trump and Elon Musk escalated. The tech CEO announced the creation of the “America Party,” a new political party to take on Trump and the Republicans.

The stated reason for Musk’s split with Trump is the recently passed budget bill. Significantly expanding the U.S. deficit, the bill undid all of the savings made by Musk’s DOGE department. What is more, Tesla’s shares have also been hurt by the loss of the electric vehicle tax credits in Trump’s budget. The change will effectively make Teslas and other EVs more expensive for U.S. customers.