The domestic stock market is taking a breather ahead of the tariff negotiations between South Korea and the United States. Investors are showing a wait-and-see attitude as they await the outcome of the negotiations.
U.S. President Donald Trump shook the independence of the Central Bank, causing the U.S. stock market to plummet overnight on the 21st, but on the 22nd, our stock market moved in a flat range. This suggests that the U.S. and South Korean stock markets are operating separately. On the night of the 22nd, the U.S. stock market surged 2 to 3%, but it is uncertain whether these expectations will be fully reflected in the South Korean stock market on the 23rd.
More important for our stock market is the imminent tariff negotiations. The results of the high-level talks between the finance and trade ministers of South Korea and the United States, scheduled for the 24th and 25th, are expected to determine the flow of the KOSPI.
The KOSPI index has not recovered to the levels prior to President Trump's announcement of aggressive tariff policies on the 2nd. The semiconductor, automobile, and steel industries, which heavily rely on exports, are also continuing to show sluggish trends.
Conversely, stocks in sectors such as shipbuilding, machinery, defense, as well as essential consumer and utility corporations are strong. For the stocks affected by tariffs to recover, and for the index to bounce back, negotiations with the U.S. over tariffs are necessary.
Heo Jae-hwan, a researcher at Eugene Securities, noted, "The attempt to recover stock prices after the 90-day suspension of mutual tariffs by U.S. President Donald Trump has shown limits," and analyzed that "the sectors that have performed strongly in the domestic stock market since the end of March are those in essential consumption, telecommunications, and distribution, which are less affected by tariffs."
According to the results of the South Korea-U.S. negotiations, the domestic stock market is expected to once again experience fluctuations. Concerns are arising that the tariff negotiations with the U.S. will not be easy. Japan, which has taken on the role of the 'first batter' in negotiations with the U.S., is experiencing internal strife to the extent that the term 'humiliating diplomacy' has emerged. The photograph of Japan's negotiating representative, Akazawa Ryosei, wearing a hat with the phrase 'MAGA (Make America Great Again)' is shaking public sentiment in Japan as well as in many countries facing tariff negotiations.
The negotiations with China, which is effectively the key player in this negotiation, are also expected to face difficulties. President Trump expressed confidence by stating, "I think we can finalize an agreement with China within 3 to 4 weeks," but market experts hold different views. While negotiations will proceed regarding the excessively high tariffs, reaching an agreement in the near term is considered unlikely.
Lee Kyung-min, a researcher at NH Investment & Securities, said, "Both Trump and Xi Jinping have expressed willingness to talk, but as the power struggle continues between the two countries, there is no certainty in the situation," and analyzed, "A negotiation table needs to be set for trade tensions to be transformed into expectations for negotiations."
As the tariff negotiations heighten risks, our exports have already taken a direct hit. According to the Bank of Korea, exports to the U.S. from the 1st to the 20th of this month have sharply declined by 14.3% compared to the same period last year. This is due to the U.S. imposing a universal tariff of 10% on all imported goods and a 25% item tariff on steel and automobiles.