U.S. President Donald Trump announced on Monday that tariffs on South Korean imports, including autos, lumber, and pharmaceuticals, would rise from 15% to 25%. The move follows Trump's claim that South Korea's legislature has not approved a trade deal agreed last July.
Immediate Action & Core Facts
1. Tariff Hike Announced: Trump declared the tariff increase via a social media post, citing South Korea's failure to ratify a trade agreement. The affected sectors include autos, lumber, and pharmaceuticals.
2. Market Reactions Mixed: South Korea's KOSPI index initially fell over 1% but later recovered to close higher. Automakers like Hyundai and Kia saw early losses but rebounded, while precious metals like gold and silver surged.
Deeper Dive & Context
Market and Economic Impact
Despite the tariff announcement, Asian markets remained resilient, with MSCI's Asia-Pacific index rising 1%. Investors focused on upcoming earnings reports from U.S. tech giants, offsetting trade concerns. Gold and silver prices climbed, reaching near-record highs amid uncertainty.
European markets are expected to open higher, with earnings from companies like ASML, Volvo, and Deutsche Bank in focus. The Federal Reserve's rate decision later this week will also influence investor sentiment.
South Korea's Response
South Korea's Industry Minister is scheduled to visit the U.S. soon, raising hopes for de-escalation. Analysts noted that trade negotiations had already been agreed at the presidential level, suggesting the tariff hike may be temporary.
Hyundai Motor shares initially dropped 4.8% but recovered to gain 1.1%, while Kia and Hyundai Mobis also saw early losses before stabilizing. The South Korean won weakened slightly against the dollar.
Broader Trade Tensions
The tariff increase adds to existing trade uncertainties under the Trump administration. Some analysts argue that the threat of random tariffs discourages long-term investment in the U.S. by foreign companies.
Trump's move comes amid broader global trade tensions, with investors closely watching how other nations respond to the latest developments.