EUR/USD declines after Trump targets Japan and South Korea with new tariffs

• The EUR/USD falls sharply after Trump announces new tariffs on Japan and South Korea.
• US President Trump publishes official tariff letters on Truth Social, targeting Japan and South Korea with 25% duties.
• Market sentiment remains fragile as investors fear disruption to global trade flows.

The Euro (EUR) remains under pressure on Monday, after briefly dipping below the 1.1700 mark against the US Dollar (USD), following the publication of official tariff letters by US President Donald Trump on Truth Social. The letters targeted Japan and South Korea with 25% duties and warned that similar measures could hit up to a dozen more countries by August 1. The renewed trade tensions unsettled global markets, boosting safe-haven demand for the Greenback and weighing on the Euro.

At the time of writing, EUR/USD is trading around 1.1708 during the American session, down 0.50% on the day. Meanwhile, the US Dollar Index (DXY) is ticking higher, hovering near 97.50 as risk sentiment remains fragile.

Concerns are growing that more countries could be hit by the new US trade measures, potentially disrupting global trade flows, dampening investor confidence, and weighing heavily on broader market sentiment.

In letters addressed to the leaders of Japan and South Korea, US President Donald Trump informed the leaders of these countries that the U.S. will impose a 25% tariff on all goods originating from their countries, effective August 1. He said these new tariffs are meant to address the long-standing trade gap between the U.S. and these nations, blaming Japan and Korea for using unfair trade practices, such as high import taxes and other barriers. Trump also said that if either country responds by raising their own tariffs, the US will add even more duties on top of the 25%. However, companies from Japan and Korea that make products inside the US will not face these tariffs. Trump explained that the goal is to protect the American economy and reduce the trade deficit, which he called a threat to national security.