Trump unveils 25% tariffs on Japan, South Korea
Longer-dated Treasuries up
Tesla shares fall on Musk's political ambition
Updates with closing US market levels
By Caroline Valetkevitch
NEW YORK, July 7 (Reuters) - Major stock indexes declined while the dollar strengthened on Monday as U.S. President Donald Trump unveiled sharply higher U.S. tariffs on goods from Japan, South Korea and other countries in the latest development in the U.S. trade war.
Longer-dated U.S. Treasury yields rose.
Trump on Monday began telling trade partners including Japan and South Korea that the higher U.S. tariffs will start August 1.
Trump in April capped all of the so-called reciprocal tariffs with trading partners at 10% until July 9 to allow for negotiations. Only two agreements, with Britain and Vietnam, have been reached.
"Trade, inflation and earnings are going to be the next three catalysts that will drive the market higher or lower, depending on how they unfold," said Adam Sarhan, chief executive of 50 Park Investments in New York.
"But markets like certainty, and today's news increases the level of uncertainty, hence the selloff," he said.
Tariffs are expected to increase prices and to slow down growth, though uncertainty over the ultimate policies may be a bigger drag as it leads businesses to postpone decisions.
S&P 500 companies next week are expected to begin reporting results on the second quarter.
The Dow Jones Industrial Average .DJI fell 422.17 points, or 0.94%, to 44,406.36, the S&P 500 .SPX fell 49.37 points, or 0.79%, to 6,229.98 and the Nasdaq Composite .IXIC fell 188.59 points, or 0.91%, to 20,412.52.
U.S.-listed shares of Japanese automotive companies fell, with Toyota Motor TM.N down 4% and Honda Motor HMC.N off by 3.9%.
Also, electric vehicle maker Tesla TSLA.O shares fell 6.8% after CEO Elon Musk announced the formation of a U.S. political party named the "American Party."
MSCI's gauge of stocks across the globe .MIWD00000PUS fell 5.80 points, or 0.63%, to 919.93. The pan-European STOXX 600 .STOXX index closed up 0.44%.
The yield on benchmark U.S. 10-year notes US10YT=RR was last up 5.7 basis points on the day at 4.397%. The interest rate sensitive two-year yield US2YT=RR rose 1.9 basis points to 3.901%.
The dollar's rise was most notable against the yen. It was up 1.09% at 146.130 JPY=. The euro EUR=EBS slipped 0.57% to $1.172 having rallied over 13% so far this year.
The dollar index =USD, which measures the currency against six major counterparts, rose 0.517% to 97.467, reaching a one-week high.
Minutes of the last Federal Reserve meeting are also due this week. Investors are weighing how many times the Fed is likely to cut interest rates this year after jobs data for June on Thursday showed that employers added more jobs than economists had forecast.
Oil prices rose as signs of strong demand offset the impact of a higher-than-expected OPEC+ output hike for August and concerns about possible tariff impacts.
Brent crude futures LCOc1 rose $1.28, or 1.9%, to settle at $69.58. U.S. West Texas Intermediate crude CLc1 gained 93 cents or 1.4%, to settle at $67.93.
(Reporting by Caroline Valetkevitch in New York; Additional reporting by Lawrence White in London and Wayne Cole in Sydney; Editing by Cynthia Osterman and Stephen Coates)
((caroline.valetkevitch@thomsonreuters.com))
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