[Good Morning Stock Market] Trump Tariff Imposition... Downward Pressure on KOSPI

On the 27th, the KOSPI is expected to start lower following news of tariff impositions announced by U.S. President-elect Donald Trump.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,860.31, up 123.74 points (0.28%) from the previous session. The S&P 500 rose 34.26 points (0.57%) to 6,021.63, and the Nasdaq Composite gained 119.46 points (0.63%) to close at 19,174.30.

Trump announced that upon taking office in January next year, he will impose a 25% tariff on all imports from Canada and Mexico on his first day, and an additional 10% tariff on Chinese goods. While imposing high tariffs on imports raises concerns about a rebound in inflation, the market initially responded with buying momentum. This was due to analyses expecting short-term benefits mainly for traditional industries, as well as the prevailing interpretation that Trump’s tariff threats are primarily negotiation tactics.

Experts believe that the tariff-related noise from Trump will persist for a considerable period. Although there is some learning effect and tolerance from the first term, considering that not only Trump but also Elon Musk, head of the Ministry of Government Efficiency, may frequently present policy directions through the media, it is advised to prepare for related noise causing volatility in the stock market for the time being.

Aside from tariff risks, if one assumes that rising interest rates and the U.S. economy’s dominance have caused the dollar’s strength, there is also analysis suggesting that additional upward pressure on the dollar is not significant at this point and that its peak may not be far off.

Considering recent interest rate hikes, inflation uncertainties, and the possibility of the U.S. Federal Reserve (Fed) holding rates steady in December, it is expected that rate cut factors could be secured in the short term through October’s Personal Consumption Expenditures (PCE) price index and in the longer term through the December Federal Open Market Committee (FOMC) meeting.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.24% compared to the previous day. The MSCI Emerging Markets (EM) ETF rose 0.45%. The KOSPI is expected to show sectoral differentiation in trading on this day.

Han Ji-young, a researcher at Kiwoom Securities, stated, “The weakness in U.S. automobile and semiconductor stocks caused by Trump’s tariff noise will act as a downward factor for domestic stock prices during the trading session. Nevertheless, the tariff-related negative factors have been somewhat pre-reflected in the domestic market the previous day, and with the rising probability of a Fed rate cut in December (currently around 63%) and expectations for the U.S. year-end consumption season, the index’s downside will be supported, resulting in sectoral differentiation in the market.”