Market reaction
Hyundai Motor (KS:005380) shares fell on Tuesday after U.S. President Donald Trump said he was increasing tariffs on some South Korean goods over a delay by Seoul in enacting a recent trade deal with Washington. The stock dropped as much as 5% in morning trade following the announcement, and the retreat extended into a fourth consecutive session of losses after Hyundai had reached a series of record highs earlier in the month. Sister company Kia Corp (KS:000270) declined by more than 3%.
Context and sensitivity
Both Hyundai and Kia are the largest exporters of South Korean vehicles to the U.S., making them especially sensitive to shifts in U.S. import tariff policy. Hyundai previously announced a package of investments in the United States intended to placate the Trump administration and to avoid exposure to significant tariff increases.
Broader market
While Hyundai and Kia experienced notable weakness, the KOSPI overall rose by 0.7% as gains among chipmakers supported local equities. Early losses across South Korean stocks were pared back on reports that the U.S. president did not provide a timetable for when any tariff increases would take effect, which prompted some market participants to hope that the hikes might not be implemented.
Tariff announcement
President Trump said he was raising tariffs on South Korean imports of autos, lumber, and pharmaceuticals to 25%, while criticizing Seoul for not having enacted a trade deal with Washington. The lack of a specified effective date for the tariff increase left room for market speculation about whether the move would actually be delivered.
Investor sentiment and vulnerabilities
Despite the broader market's muted reaction to the announcement, Hyundai remained exposed to profit-taking. The company had seen sharp share gains during the month amid growing investor optimism about its prospects in robotics and autonomous driving; that optimism made the stock more vulnerable to a pullback when news prompted investors to lock in gains.
Key points
- Hyundai shares dropped as much as 5% following the tariff announcement, extending a multi-session decline.
- Kia Corp fell more than 3%, reflecting sensitivity of South Korean vehicle exporters to U.S. tariff measures.
- Broader KOSPI advanced 0.7% as gains in chipmakers helped offset early losses tied to tariff concerns.
Risks and uncertainties
- Timing uncertainty - The U.S. president did not specify when the tariff hikes would take effect, leaving markets uncertain about the immediacy of any impact.
- Profit-taking risk - Hyundai's recent strong performance, driven in part by optimism about robotics and autonomous driving, made the stock susceptible to sell-offs when negative news emerged.
- Sector exposure - Auto exporters, lumber and pharmaceutical exporters from South Korea face direct exposure to higher U.S. import tariffs if implemented.