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Dollar gains on stocks as Trump prepares 25% tariffs against Japan and South Korea

The dollar gained strength on Monday after U.S. president Donald Trump announced sharply increased tariffs against goods imported from Japan, South Korea, and other countries. This is the latest development in U.S.'s trade war.

The yields on longer-dated U.S. Treasury bonds rose.

Trump began Monday telling his trade partners, including Japan and South Korea, that higher U.S. Tariffs will begin August 1.

Trump in April set a 10% cap on all so-called reciprocal Tariffs with trading partners until July 9, to allow time for negotiations. Only two agreements have been reached, with Britain, and Vietnam.

Adam Sarhan is the chief executive officer of 50 Park Investments, a New York-based investment firm.

He said: "Markets like certainty and the news of today increases the level uncertainty. Hence the selloff."

Tariffs will likely increase prices and slow growth. However, uncertainty about the final policies could be more of a drag on business as they postpone making decisions.

Next week, S&P 500 companies are expected to start reporting their results for the second quarter.

The Dow Jones Industrial Average dropped 422.17 points or 0.94% to 44,406.36, while the S&P 500 declined 49.37 points or 0.79% to 6,229.98, and the Nasdaq Composite lost 188.59 or 0.91% to 20,412.52. U.S. listed shares of Japanese automakers fell. Toyota Motor was down 4%, and Honda Motor by 3.9%.

Tesla shares also fell 6.8% when CEO Elon Musk revealed the formation of the "American Party," a new political party in the United States.

MSCI's global stock index fell by 5.80 points or 0.63% to 919.93. The pan-European STOXX 600 closed at 0.44%.

The yield on benchmark U.S. 10 year notes rose 5.7 basis points in the last day to 4.397%. The yield on the interest rate-sensitive two-year note rose 1.9 basis to 3.901%.

It was the dollar's increase against the yen that was most noticeable. The dollar was up by 1.09% to 146.130. The euro fell 0.57%, to $1.172 after a rally of over 13% this year.

The dollar index (which measures the currency in relation to six major counterparts) rose by 0.517%, reaching an all-time high of 97.467.

The minutes of the Federal Reserve's last meeting are due this week. Investors are trying to determine how many times they expect the Fed to reduce interest rates in this year, after Thursday's jobs data showed that employers had added more jobs than forecast.

The oil price rose on signs of strong demand, which offset the impact from a higher than expected OPEC+ production increase for August as well as concerns over possible tariff effects.

Brent crude futures gained $1.28 or 1.9% to settle at $69,58. U.S. West Texas Intermediate Crude gained 93 cents, or 1.4% to settle at $67.33. (Reporting from Caroline Valetkevitch, New York; Additional Reporting by Lawrence White, London; and Wayne Cole, Sydney; Editing and rewriting by Cynthia Osterman and Stephen Coates.)

(source: Reuters)