"KOSPI drops 23% in 2018"... Stock market tension rises with Trump's tariff war
- It is analyzed that foreign investors' withdrawal from the Korean stock market is accelerating due to U.S. President Trump's tariff war.
- During the first Trump administration, the imposition of tariffs also led to a roughly 23% drop in the KOSPI, raising concerns about negative impacts on the Korean economy and stock market this time as well.
- It is stated that the liquidity risk in the Korean stock market could increase due to the possibility of U.S. interest rate hikes and pressure on the won-dollar exchange rate to rise.
- The article was summarized using an artificial intelligence-based language model.
- Due to the nature of the technology, key content in the text may be excluded or different from the facts.
Tension in the Korean stock market is escalating as U.S. President Donald Trump opens the door to a tariff war. During Trump's first term, the initiation of the tariff war accelerated the withdrawal of foreign investors from the Korean stock market, causing the KOSPI, which was eyeing the 2600 mark, to fall below 2000.
According to the Korea Exchange on the 2nd, the KOSPI recorded 2517.37 on the 31st of last month. It fell by 0.77% compared to just before the Lunar New Year holiday. It is considered to have fared well compared to the significant drop in global stock markets due to the shock from China's AI startup DeepSeek during the holiday.
However, foreigners sold off stocks worth 1.1755 trillion won in the securities market on the 31st of last month. Concerns about the Trump administration's global tariff war are said to have fueled foreign investors' aversion to risky assets.
Over the weekend, the tariff war became a reality. On the 1st (local time), President Trump signed an executive order imposing additional tariffs of up to 25% on Mexico and Canada and 10% on China.
For Korea, which has an export-dependent economic structure, a tariff war is not beneficial. During the first Trump administration in 2018, U.S. tariffs on the world also hit companies hard. As a result, Korea's economic growth rate plummeted from 2.9% in 2018 to 2% in 2019.
The KOSPI also rose to 2598.19 in January 2018 but fell by 23.17% to 1996.05 in October of the same year.
There is a significant possibility that the Trump administration will target Korea with tariffs again this time. This is because exports to the U.S. have increased significantly. Last year, Korea's exports to the U.S. amounted to $127.8 billion, a 10.5% increase from the previous year, marking a record high for the seventh consecutive year.
The U.S. tariff policy is also negative for the stock market in terms of liquidity. It raises U.S. inflation, making it difficult for the Federal Reserve to lower interest rates. If U.S. interest rates rise, the value of the dollar strengthens, leading to an increase in the won-dollar exchange rate. If the exchange rate is expected to continue rising, foreign investors' withdrawal from the Korean stock market due to concerns about exchange losses may accelerate.
Already, the dollar-won exchange rate has been fluctuating in the mid-to-high 1400 won range due to domestic political uncertainties since President Trump's inauguration.

Korea Economic Daily

hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.PiCK News
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