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Trump unveils 25% tariffs on Japan, South Korea

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Longer-dated Treasuries up

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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 fell 422.17 points,

or 0.94%, to 44,406.36, the S&P 500 fell 49.37 points, or

0.79%, to 6,229.98 and the Nasdaq Composite fell 188.59

points, or 0.91%, to 20,412.52.

U.S.-listed shares of Japanese automotive companies fell,

with Toyota Motor down 4% and Honda Motor off by

3.9%.

Also, electric vehicle maker Tesla 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 fell

5.80 points, or 0.63%, to 919.93. The pan-European STOXX 600

index closed up 0.44%.

The yield on benchmark U.S. 10-year notes was

last up 5.7 basis points on the day at 4.397%. The interest rate

sensitive two-year yield 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. The euro slipped 0.57% to

$1.172 having rallied over 13% so far this year.

The dollar index, 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 rose $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 $67.93.