South Korea automaker shares slip after US trade deal

The shares of South Korean automakers Hyundai and Kia Corp dropped on Thursday, after U.S. president Donald Trump announced that the U.S. would charge a 15% duty on auto imports from South Korea as part of an agreement on trade.

The agreement does not reduce auto tariffs to 25% but it does remove the 2,5% advantage that South Korean automakers enjoyed over their Japanese competitors under the Korea-U.S. Free Trade Agreement.

Analysts said that the shares may have fallen due to profit-taking, as the news of the tariffs had already been factored into the market. Last week, South Korean automaker stocks surged after news that Trump agreed that Japanese auto imports would be reduced to 15%. This stoked hopes for a similar agreement in Seoul.

The South Korean auto association called the tariff reductions "fortunate". It said that it removed uncertainty and created a level playing field with Japanese and European competitors.

Hyundai Motor stated that the deal "validates Hyundai Motor's unwavering commitment to American manufacturing and the U.S. Market."

Hyundai Motor Group announced in March a $21 Billion investment in the United States at Trump's White House. This included a $5.8 Billion steel factory, and the expansion of Hyundai Motors' new car factory in Georgia.

Prior to Washington's 25% auto tariffs, most South Korean imports were exempt from tariffs as part of a bilateral agreement, and Japanese imports had a 2.5% tax.

The South Korean government demanded a 12.5% tariff on autos but Trump wanted a 15% rate, according to the president's office.

Hyundai Motors shares dropped 4.5%, and Kia Corp. stock fell 6.6%.

(source: Reuters)