Dow Tumbles 422 Points as Trump Sets New Tariffs

Wall Street's major indexes closed lower Monday, after U.S. President Donald Trump announced hefty tariffs against Japan, South Korea and other trading partners while Tesla shares sank after CEO Elon Musk said he was forming a new U.S. political party.

Indexes added to losses after Trump announced the tariff rates against Japanese and South Korean imports, due to take effect on August 1. Stocks wobbled further in the late afternoon when he announced hefty tariffs on Malaysia, Kazakhstan, South Africa, Laos and Myanmar.

Last week, both the Nasdaq and the S&P 500 ended three sessions with record high closes. The latest record finishes came on Thursday after a robust jobs report.

"Markets had been telling us that peak tariff risk is behind us, but to have tariffs back in the forefront is causing some skittishness," said Emily Roland, co-chief investment strategist at Manulife John Hancock Investments in Boston. "Investors were getting to that period of ebullience in markets and we're taking a little step back from that."

But investors likely have some hopes the announcements are not permanent, she said: "That's the pattern we've been in, announcing punitive tariffs and then dialing that back a little bit. That could certainly be the next phase of this back and forth negotiation," said Roland.

According to preliminary data, the S&P 500 lost 49.39 points, or 0.77%, to end at 6,230.76 points, while the Nasdaq Composite lost 183.18 points, or 0.89%, to 20,417.92. The Dow Jones Industrial Average fell 422.17 points, or 0.95%, to 44,400.64.

One of the S&P 500's biggest drags was from electric vehicle maker Tesla, whose shares dived after CEO Musk announced formation of a new political party named the "America Party", further escalating his feud with Trump.

Investors also awaited other U.S. trade announcements after Trump said on Sunday that the U.S. was on the cusp of several deals and would notify other countries of higher tariffs by July 9, with new duties to take effect on August 1.

On Monday, Trump threatened an extra 10% tariff on countries aligning themselves with the "Anti-American policies" of the BRICS group of Brazil, Russia, India, China and South Africa.

In early April, stock indexes saw dramatic volatility after Trump unveiled a base tariff rate of 10% on most countries and additional duties ranging up to 50% on April 2 and then announced a 90-day pause days later.

In early April, the Nasdaq confirmed a bear market or a 20% drop from its recent record, while the S&P 500 had narrowly averted a bear. Both indexes had returned to record levels by late June.

Shares of WNS Holdings rallied after the French IT services firm Capgemini agreed to buy the outsourcing firm for $3.3 billion in cash.

Trump's tariff policies have stoked inflation worries, further complicating the Fed's path to lower rates. Minutes of its June meeting, scheduled for release on Wednesday, should offer more clues on the monetary policy outlook.

Traders are betting on a roughly 95% probability that rates will remain unchanged in July while the odds for a September cut are close to 60%, according to CME Group's FedWatch tool.

Another area of investor focus is U.S. tax-cut and spending plans, signed into law by Trump late last week. These are expected to swell the national deficit by over $3 trillion in the next decade.