^{Photo: BBC}

South Korean auto stocks clawed back much of their early losses on Tuesday, even after U.S. President Donald Trump warned overnight that Washington could sharply raise tariffs on South Korean goods, reigniting trade tensions between the two allies.

The rebound came as broader Asia-Pacific markets tracked gains from Wall Street, with investors largely brushing off the tariff threat and focusing instead on global equity momentum and upcoming U.S. tech earnings.

Trump threatens higher tariffs on South Korea

Market volatility was sparked after President Trump said on Truth Social that South Korea’s legislature had failed to approve its trade agreement with the United States. He warned that tariffs on Asia’s fourth-largest economy could rise to 25%, up from the current 15%, if progress is not made.

The comments immediately weighed on South Korean exporters at the open, particularly automakers that rely heavily on U.S. sales. The United States remains one of Hyundai and Kia’s largest overseas markets, accounting for a significant share of their global deliveries.

Hyundai Motor shares dropped as much as 4% in early trading, while Kia fell nearly 5% at their session lows. As the day progressed, both stocks stabilized. Hyundai eventually moved into positive territory, last trading about 1.1% higher, while Kia narrowed its decline to roughly 1.1%.

Investors appeared to take comfort in the lack of immediate policy action, treating Trump’s remarks as a negotiating signal rather than an imminent tariff increase.

Korean markets lead Asia higher

Despite the headline risk, South Korea’s broader equity market showed resilience. The benchmark Kospi reversed earlier losses to close up 2.02%, leading gains across Asia, while the tech-heavy Kosdaq added 1.04%.

Elsewhere in the region, stocks also traded higher:

Australia’s S&P/ASX 200 climbed 0.96% to its highest level in nearly three months after reopening from a holiday, supported by financials and mining shares.

Japan’s Nikkei 225 erased early declines to finish 0.59% higher, boosted by industrial and technology names, while the broader Topix rose 0.23%.

Hong Kong’s Hang Seng Index advanced 1.08%, led by basic materials and consumer stocks. On the mainland, China’s CSI 300 edged up 0.3%.

In Hong Kong, Anta Sports shares gained around 1.4% after the company announced a $1.8 billion acquisition for a 29.06% stake in German sportswear brand Puma, a move that strengthens Anta’s global footprint and highlights continued dealmaking in the consumer sector.

Wall Street momentum supports Asia

Asian markets were buoyed by a positive overnight session in the United States. The S&P 500 rose 0.50%, while the Dow Jones Industrial Average added 0.64%.

The Nasdaq Composite climbed 0.43%, supported by gains of roughly 3% in Apple, 2% in Meta Platforms, and about 1% in Microsoft ahead of their quarterly earnings later in the week. The strong performance of major tech stocks helped reinforce risk appetite across global markets.

What’s at stake for South Korea’s auto industry

South Korea’s auto sector is particularly sensitive to U.S. trade policy. Hyundai and Kia together sell hundreds of thousands of vehicles annually in the U.S., and any increase in tariffs could pressure margins, disrupt supply chains, and accelerate shifts toward localized production.

Both companies have already committed billions of dollars to expand manufacturing in North America, including large electric vehicle and battery investments in the United States, partly to reduce exposure to future trade barriers.

For now, investors appear to be betting that negotiations will continue and that any tariff escalation will take time, allowing companies and policymakers room to maneuver.

While Trump’s comments injected short-term uncertainty, Tuesday’s market action suggests that traders remain focused on global growth prospects, corporate earnings, and the broader trajectory of equities rather than a single round of tariff rhetoric.

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