Unlocking Value in U.S.-South Korea Trade: Automotive and Steel Plays Post-July 8 Deadline

The clock is ticking for U.S.-South Korea tariff negotiations, with a critical deadline of July 8, 2025, to resolve trade tensions that could reshape industries on both sides of the Pacific. A successful deal could unlock significant opportunities in the automotive and steel sectors, while a stalemate risks prolonged headwinds. For investors, the stakes are high: $5.5 billion in South Korean auto exports, $2.9 billion in steel imports, and global supply chains hang in the balance.

The Automotive Sector: EVs, Compliance, and Undervalued Stocks

The automotive industry is at the heart of the negotiations. U.S. tariffs on South Korean light vehicles currently sit at 25%, with the threat of a jump to 26% by July 8 if no agreement is reached. For Hyundai and Kia—whose combined U.S. market share of 16% hinges on tariff exemptions—this is a make-or-break moment.

Why Hyundai and Kia Are Key

Hyundai's $5.5 billion EV plant in Alabama is a linchpin. By meeting 75% regional steel and aluminum content requirements under USMCA, the plant could qualify for tariff exemptions, unlocking a 15–20% upside in its undervalued shares (trading at 8x–9x EV/EBITDA vs. a 10-year average of 11x). A deal would also alleviate pressure on U.S. automakers reliant on South Korean parts, such as battery systems and semiconductor components.

Investment Play: Buy Hyundai and Kia on Deal Expectations

If tariffs are suspended, automotive stocks like Hyundai (HYMLF) and Kia (KIAGY) could surge. Monitor their EV sales growth in the U.S. and compliance with USMCA rules. A post-July 8 resolution could also lift suppliers such as Hyundai Mobis (HYMTF), which provides critical components to both Hyundai and Kia.

Steel Sector: POSCO's Turnaround Potential—and Risks

The steel industry faces tariffs of 50% on U.S. imports, a burden for South Korea's POSCO (PKX), which accounts for $2.9 billion in U.S. steel imports annually. A deal could remove this overhang, but until then, investors should tread carefully.

POSCO's Dilemma

POSCO's shares have stagnated amid uncertainty, with the company in a “holding pattern” until post-July 8 clarity. A resolution could allow it to resume exporting to U.S. automakers and manufacturers, reducing reliance on China-centric demand. However, failure to secure exemptions could push POSCO deeper into the red, as tariffs eat into margins.

Investment Caution: Avoid Steel ETFs Until After July 8

Steel ETFs like SLX (Global X Steel ETF) remain risky pre-deadline. Focus instead on automotive plays or semiconductor ETFs like SMH (VanEck Semiconductor ETF), which could benefit indirectly from lower supply chain costs.

The Bigger Picture: Why a Deal Benefits Both Economies

A resolution would:
1. Boost South Korean Exports: Automakers and steel producers could see a $37 billion boost in U.S. investments, including Samsung's Texas semiconductor plant and SK Hynix's AI chip projects.
2. Stabilize U.S. Supply Chains: Automakers and tech firms reliant on Korean inputs (e.g., LG Energy Solution's EV batteries) would avoid cost spikes.
3. Support Global EV Growth: Lower tariffs on steel and aluminum could reduce EV manufacturing costs, aiding U.S. adoption targets.

Risks if Talks Stall

• Auto Sector: Hyundai and Kia face a 20% rise in production costs, squeezing margins and stock valuations.
• Steel Sector: POSCO's shares could drop further, and U.S. steel ETFs like SLX might underperform.
• Geopolitical Fallout: Escalating tariffs could reignite trade wars, destabilizing global supply chains.

Investment Strategy: Time the Deal Window

• Buy Now (Post-July 8 Deal):
• Hyundai (HYMLF) and Kia (KIAGY) for EV-driven U.S. growth.
• POSCO (PKX) if steel tariffs are suspended.

• Semiconductor ETF SMH for chipmakers benefiting from lower input costs.

• Avoid Until Clarity:

• Steel ETFs (SLX) and legacy automakers lacking U.S. manufacturing exposure.

• Hedge with Options:

• Use puts on HYMLF to limit downside risk.
• Calls on SMH to capitalize on a tech rebound.

Conclusion

July 8 is a pivot point for U.S.-South Korea trade. A deal would supercharge automotive and steel sectors, rewarding investors in Hyundai, Kia, and eventually POSCO. A failure, however, risks a prolonged slump. For now, bet on the automotive upside—just keep an eye on that deadline.