South Korea-U.S. Tariff Delays: A Strategic Opportunity for Automotive and Steel Investors

The clock is ticking for South Korea's exporters, but Lee Jae-myung's proposed strategy to extend U.S. tariff negotiations offers a lifeline. With the July 8 deadline for the 26% reciprocal tariff suspension looming, Lee's approach to delay and negotiate could transform near-term risks into long-term rewards. For investors, this is a pivotal moment to capitalize on undervalued equities in the automotive and steel sectors, while positioning for supply chain realignment and U.S. infrastructure partnerships.

The Grace Period: A Breathing Space for Hyundai and POSCO

The U.S. imposed a 26% tariff on South Korean imports as part of its “America First” agenda, targeting sectors like automotive and steel. However, Lee's campaign has prioritized extending the 90-day grace period beyond July 8, buying critical time for companies like Hyundai Motor (005380.KS) and POSCO (005490.KS) to stabilize operations.

Current data shows the immediate threat to these firms is mitigated:

For Hyundai, the delay avoids a 25% tariff on U.S. exports of vehicles like the Santa Fe, which contributed 18% to its 2024 revenue. POSCO, the world's third-largest steelmaker, faces averted disruptions to its $8.2 billion annual U.S. steel exports. Lee's strategy ensures these firms can focus on restructuring and diversification rather than panic selling.

Long-Term Gains: Supply Chain Realignment and U.S. Partnerships

Lee's broader vision extends beyond tariffs. He seeks a “package deal” integrating defense cost-sharing, infrastructure projects (e.g., Trump's Alaska gas pipeline), and automotive partnerships. This creates two key opportunities:

1. Steel Sector Reconfiguration: POSCO and Korea Steel (000670.KS) stand to benefit from U.S.-South Korea collaboration in advanced materials for defense and energy infrastructure.
2. Automotive Tech Leadership: Hyundai's hydrogen fuel cell division (H2 Mobility) and electric vehicle (EV) partnerships with U.S. firms could secure tariff exemptions under new trade frameworks.

The geopolitical catalyst? Lee's election victory on June 3 would solidify his negotiating stance. Investors who act now gain a first-mover advantage as tariffs remain suspended and U.S.-South Korea talks advance.

Why Invest Now: Valuation Metrics and Catalysts

The automotive and steel sectors are undervalued relative to their growth potential:
- Hyundai Motor trades at a 2025 P/E of 7.8x, below its five-year average of 9.2x.
- POSCO has a P/B of 0.8x, signaling underappreciated asset value.

Key catalysts post-June 3:
1. Lee's “One-Stop” Negotiation: A comprehensive agreement could unlock U.S. infrastructure funding for POSCO's green steel projects and Hyundai's EV factories.
2. Defense Cost-Sharing Stability: Lee's refusal to accede to unconditional U.S. demands limits fiscal risks for exporters, unlike rival Kim Moon-soo's aggressive concessions.

Risks and the Case for Immediate Action

The primary risk is a Lee electoral defeat, which could accelerate tariff hikes under a conservative administration. However, polls show Lee leading by 18 percentage points, making this outcome unlikely. The greater risk is inaction: waiting until after July 8 could mean missing the entry point as equities rebound on delayed tariff fears.

Conclusion: Act Before the Clock Runs Out

Lee Jae-myung's strategy is not just about delaying tariffs—it's about rewriting the rules of engagement with the U.S. Automotive and steel stocks are priced for pessimism, but the path to a “comprehensive alliance” points to sustained growth. Investors who act now can secure stakes in companies poised to dominate reshaped supply chains and infrastructure projects. The window is narrow—July's deadline and June's election demand urgency.

Recommended Positions:
- Overweight Hyundai Motor (005380.KS) and POSCO (005490.KS).
- Monitor U.S. infrastructure-linked firms like Doosan Heavy Industries (042660.KS).
- Use the grace period to build stakes ahead of tariff certainty.

The next six weeks will decide the trajectory of South Korean equities. Don't let this opportunity slip away.