Tariff blow sinks Kospi, clouds growth outlook

Korea Herald

10-04-2025

The South Korean benchmark Kospi sank below the threshold of 2,300 points for the first time in 17 months, suffering a blow from the angst surrounding "reciprocal tariffs" imposed by the US. Coupled with the stock market's slump, the value of the Korean won against the US dollar further weakened past 1,480 won.
As 25 percent tariffs on Korean goods imported to the US took effect Wednesday as previously scheduled, the Kospi closed daytime trading at 2,293.7, sliding 40.53 points, or 1.74 percent, according to data from the Korea Exchange. It was the first time the index had dropped below the 2,300 mark since Nov. 1, 2023.
The index kicked off trading at the opening bell at 2,329.99, but losses deepened through the session, dipping to as low as 2,284.72.
Foreign investors deepened the market's loss by dumping shares worth 1 trillion won ($677 million) on the Kospi, while institutional investors net sold 70 billion won. Retail investors were the sole buyers, racking in shares worth 939 billion won.
The secondary bourse Kosdaq closed daytime trading at 643.39, losing 15.06 points or 2.29 percent on-day. It was the first time the Kosdaq dropped below the 650 threshold since Dec. 9, 2023.
The plunge comes two days after a sidecar — a five-minute halt on program trading — was activated on Kospi 200 futures on Monday, as the Kospi fell below 2,400.
With the bearish bourse, market bellwethers Samsung Electronics closed trading at 53,300 won, down 0.19 percent, while SK hynix wrapped the session up at 165,000 won, down 2.65 percent.
Amid heightened tension between the US and China sparked by US President Donald Trump's tariffs, investors are shifting to low-risk assets, weighing pressure on the Kospi.
The US' 25 percent tariff imposition on Korea casts a cloud over its export-dependent economy, as higher tariffs drive up the manufacturing expenses.
The 46 percent tariff levied on Vietnamese goods is also likely to negatively impact Korean companies like Samsung Electronics and LG Electronics, considering the Southeast Asian country serves as a key production hub for the tech giants.
Experts predict the tariffs could hold back the overall growth of the Korean economy, which has already been suffering from a slowdown in private consumption.
KB Securities estimated that Trump's tariffs could pull down Korea's growth rate by up to 0.4 percentage point.
The Korea Institute for International Economic Policy also projected that Korea's total exports could shrink by $44.8 billion if the US imposes a 20 percent tariff on all countries. The impact could be bigger still, as the actual tariffs that materialized are higher.
Pricing in similar concerns, other stock markets in Asia were also deep in the red. Benchmark indices of major Asian economies such as Japan, Taiwan and Hong Kong suffered a roughly 4 percent loss.
Foreign investors' continued selling spree on the stock market also pulled down the local won's value per dollar.
The Korean won's value per greenback reached 1,487.6 won during daytime trading Wednesday, weakening to its worst figure since hitting a high of 1,492 won on March 16, 2009. It even surpassed the recent intraday trading peak set at 1,487.2 won on Dec. 27.
The won eventually closed daytime trading at 1,484.1 won per dollar, devaluing by 10.9 won on-day.
The won's depreciation is being exasperated by the devaluation of the Chinese yuan, as the local currency is treated as the yuan's proxy. The offshore yuan fell to its weakest level on record upon speculation of China easing its grip on the currency in an attempt to offset the blow to exports amid the intensified trade war.
'If the US-China currency war intensifies and the Chinese yuan further weakens, the won-per-dollar rate is more likely to surpass the 1,500 won threshold,' iM Securities analyst Park Sang-hyun said.