KOSPI Drops 2.2% as Trump Tariff Proposal Sparks Sell-Off

The Korean benchmark KOSPI index experienced a notable decline, falling 2.2% to 2449.72 points during early trading. This downturn was primarily driven by a sharp drop in semiconductor, battery, and automotive stocks. The market sentiment was heavily influenced by the announcement of a higher-than-expected 25% reciprocal tariff proposed by former U.S. President Donald Trump. This move led to a surge in risk aversion among investors, with foreign and institutional investors becoming net sellers.

The impact of the tariff announcement was not limited to the stock market. The Korean won weakened against the U.S. dollar, with the USD/KRW exchange rate rising 0.3% to 1,471.10 won in onshore trading in Seoul. This depreciation of the Korean won reflects the broader market sentiment of uncertainty and risk aversion.

Several key companies in the semiconductor, battery, and automotive sectors saw notable declines. SK Hynix, a major manufacturer of storage chips, dropped 4.5%. LG Energy Solution, a leading producer of electric vehicle batteries, fell 5.0%. Hyundai Motor, one of the largest automotive manufacturers, declined 3.7%, reaching its lowest point since January 31, 2024. The 10-year Korean government bond yield also decreased by 2.0 basis points to 2.767%, indicating a flight to safety among investors.

The overall market reaction underscores the sensitivity of Korean stocks to geopolitical developments and trade policies. The proposed tariffs have raised concerns about potential economic slowdowns and increased costs for Korean exporters, particularly in the technology and automotive sectors. The decline in the KOSPI index and the weakening of the Korean won highlight the challenges faced by the Korean economy in navigating the current global trade environment.