Korea Proves Resilient in Face of Trump Trade Threat With New Record

South Korean stocks set a new all-time high on Tuesday, with the benchmark Kospi closing above the 5,000 mark for the first time.

Seoul stocks surged 2.7% on Tuesday, and are now up a heady 20.7% so far this year.

I’ve been focusing on Japanese markets now that popular Prime Minister Sanae Takaichi has called an early election for February 8. That’s been the main market-moving geopolitical event in Asia, with Takaichi looking to resume the equity-positive policies of her political mentor, the late Shinzo Abe.

Today we also have India inking a trade deal with the European Union, which will offset some of the price shock of the sky-high 50% tariffs levied by Washington on U.S. companies that import Indian exports. More on that later.

But the trends that drove strong Asian equity gains last year remain in place. The strong outperformance of the semiconductor sector is the bedrock of the gains in South Korea, where the two chipmakers Samsung Electronics (KR:00593) and SK Hynix (KR:000660) account for more than one-third of the total market capitalization in Seoul.

Korea’s Kospi Closes Above 5,000 for First Time

That’s why the Seoul market is a turbocharged tech play. The Kospi ended last year at 4,214.17 and closed today at 5,084.85.

Remarkably, Korean stocks started today by moving lower. U.S. President Donald Trump on Monday night threatened to raise tariffs on U.S. imports of South Korean goods from their current level of 15% to 25%, including the key auto industry, blaming the Korean legislature for failing to pass last year’s tariff agreement with Washington.

But we got supportive factors driving Hynix shares up 8.7% on Tuesday, with Korean news agency Yonhap reporting that Hynix has been selected as the exclusive provider of high-performance high-bandwidth memory (HBM) chips to Microsoft  (MSFT) . Hynix will supply chips to power Microsoft’s artificial intelligence (AI) accelerator.

Samsung Electronics ended Tuesday up 4.9% in Seoul. That’s outdoing the semiconductor industry as a whole, as measured by the VanEck Semiconductor ETF  (SMH) , with Samsung up 12.4% in the last five days to the 3.6% gain advance in the chip ETF.

All-Time Highs for Hynix and Samsung

Like the Korean market as a whole, both Hynix and Samsung on Tuesday set all-time closing highs. Samsung on Tuesday showcased a new version of its Galaxy Z Flip 7 phone that will be given free to the 3,800 athletes at the Winter Olympics that start on February 6. The phone will have a “Victory Selfie” feature designed for the medal winners to take selfies on the podium.

While Samsung’s stock surge is largely due to its successful efforts to improve its high-performance chip output, the “Olympic Edition” smartphone is a savvy public-relations move to capitalize on its Olympics partnership.

So, Seoul stocks on Tuesday rode out that early dip produced by Trump’s social-media post. Not only is the U.S. Supreme Court considering ruling against the legality of Trump’s tariffs, effectively a tax increase not approved by Congress, but we can also bet that Trump won’t follow through on his threats once Korean officials explain how hard they’re working to implement last year’s trade “deal.”

The deal struck last July includes a pledge for Seoul to invest $350 billion into the United States. But South Korea asked for time to flesh out those details, concerned that such a huge outflow of currency could impact the value of the Korean won. South Korea agreed to pay $200 billion in cash in phased installments capped at $20 billion per year.

Korean Politicians Head to Washington

The South Korean administration, surprised by Trump’s move, is moving quickly to defuse the tension with Washington. It has sent Industry Minister Kim Jung-kwan, who was visiting Canada, to meet U.S. Commerce Secretary Howard Lutnick in the U.S. capital.

Korean trade minister Yeo Han-koo is also heading to Washington to meet with U.S. Trade Representative Jamieson Greer.

The ruling Democratic Party in November submitted to the Korean national assembly, its one-chamber congress, a special bill designed to support that $350 billion investment pledge. But the law hasn’t passed.

The administration in Seoul says the investment into the United States is also being delayed by the weakness of the Korean won. Although the won has strengthened 2.8% in just over a month since December 24, 2025, the Korean currency is substantially weaker, at the current rate of 1,439 won per $1, than the 10-year average exchange rate of 1,202.

TACO Trade Seems Likely

Bottom line? Auto stocks fell today, with Hyundai Motor (KR:005380) down 0.8% and affiliate Kia (KR:000270) down 1.1%. But Hyundai shares have shot up 63.7% this year alone, hitting an all-time record last week, with investors excited about the potential for a tie-up with chip designer Nvidia  (NVDA)  on AI and robotics.

The market reaction in Seoul suggests the chip story will continue to determine the trajectory of Seoul stocks, with Trump likely to deliver another “TACO” trade if he backs off on the tariff threat.

Trump is irked by the market messaging that "Trump Always Chickens Out." But data from the betting markets company Polymarket demonstrate that ignoring Trump's declarations has paid off by $12 on every $100 wagered, while betting he will do what he says he will do would have lost you $20 on every $100. 

EU-India Trade Deal Should Boost, Not Punish, Trade

I said I would address the EU-India trade deal in a little greater depth. 

Long-suffering investors into India, where equities have sorely underperformed, can hope the trade deal provides an underpinning for the Mumbai markets to retest their September 2024 all-time highs.

Unlike the Trump administration’s shaky “trade deals,” which are vaguely worded and typically simply impose higher U.S. import taxes in exchange for very little, the EU-India pact is a traditional, highly specific trade agreement that’s the outcome of two decades of talks.

Details differ by the types of goods, and the deal also includes services, but overall it will reduce tariffs on 96.6% of European shipments into India, and 99.5% of Indian exports into Europe, boosting trade in both directions. However, the formal signing may take as long as a year.

We can, though, be far more certain that the EU-India agreement will go into effect and boost trade. Trump’s trade bullying appears unlikely to deliver real-world results, and savvy politicians can likely ride out his administration until Trump becomes a lame duck with the November 2028 presidential election.

At the time of publication, McMillan was long NVDA.