South Korean auto shares rebound after tariff hike announcement, markets jittery

South Korea's major automakers erased a portion of steep early declines after U.S. President Donald Trump said he would raise tariffs on South Korean imports, including autos, from 15% to 25%. While Hyundai Motor moved into positive territory, other auto-related names and the Korean won showed volatility as markets parsed the announcement and analysts weighed prior trade understandings between Seoul and Washington.

Key Points

President Trump's social media post said tariffs on South Korean imports tied to autos, lumber and pharmaceuticals would rise to 25% from 15%, but did not specify timing or triggers for implementation - impacting autos, trade-sensitive sectors and currency markets.
Hyundai Motor recovered to a 1.1% gain after earlier falling as much as 4.8%; Kia Corp was down 1% after an intraday drop of up to 6%; Hyundai Mobis eased 0.1% after earlier losses up to 5.7% - directly affecting the auto sector and parts suppliers.
The KOSPI index was trading 1.2% higher as of 0150 GMT while the won weakened 0.52% to 1,451.1 per dollar on the open at 0000 GMT, reflecting volatility in equity and FX markets.

Shares of South Korea's automotive groups pared much of an initial sell-off on Tuesday after U.S. President Donald Trump posted that he would increase tariffs on South Korean goods tied to autos, lumber and pharmaceuticals to 25% from 15%. The comment set off rapid moves in equity and currency markets before some stocks recovered.

Hyundai Motor swung from early losses to a 1.1% gain after having slid as much as 4.8% earlier in the session. Kia Corp, a sister company of Hyundai, was trading down about 1% after an intraday drop of as much as 6%. Supplier Hyundai Mobis was marginally lower, down 0.1% following earlier declines of up to 5.7%.

The wider market also showed movement: the benchmark KOSPI index was up 1.2% as of 0150 GMT. Currency markets reacted as well. The South Korean won weakened by 0.52% to 1,451.1 per U.S. dollar when the dollar-won onshore market opened in Seoul at 0000 GMT, after having strengthened as much as 2% the previous day.

President Trump's post announced the tariff increase but did not specify when any hike would take effect, nor did it identify what precisely prompted his directive. That lack of detail left market participants seeking clarity on timing and implementation.

Some market observers noted that trade talks at the presidential level between South Korea and the United States had already produced agreements. In line with that perspective, Kim Joon-sung, a senior analyst at Meritz Securities, said auto export tariffs to the United States were expected to be reconfirmed at 15%.

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Markets remained sensitive to further guidance from policymakers or any formal steps that would convert the posted tariff intentions into enforceable measures.

Risks

Uncertainty over when, or if, the announced tariff increase would take effect - this creates policy risk for exporters in the auto, lumber and pharmaceutical sectors.
Potential for further currency volatility if market participants reassess trade prospects between South Korea and the United States - impacting exporters, importers and financial markets.
Possible disconnect between presidential-level trade understandings and unilateral tariff statements - leaving market participants uncertain about enforceable trade terms for companies that rely on U.S. exports.

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