New York stocks close higher… U.S.-Taiwan reach trade deal setting reciprocal tariffs at 15% [Morning Briefing]

◆ New York stocks close higher on rebound in semiconductors and financials

Wall Street’s three major stock indexes finished in positive territory. Investor appetite spread across the broader semiconductor sector after Taiwan’s TSMC posted record results. However, the major indexes quickly gave back gains late in the session, underscoring lingering concerns about stretched valuations near recent highs. At the close on the 15th (local time) on the New York Stock Exchange (NYSE), the Dow rose 292.81 points (0.60%) to 49,442.44. The S&P 500 gained 17.87 points (0.26%) to 6,944.47, and the Nasdaq added 58.27 points (0.25%) to end at 23,530.02.

◆ U.S.-Taiwan reach trade deal setting reciprocal tariffs at 15%

The United States and Taiwan on the 15th (local time) signed a trade agreement lowering the reciprocal tariff rate to 15% and calling for Taiwanese companies to make $250 billion in direct investment in the U.S. The U.S. Department of Commerce said in a release that Taiwan’s semiconductor and technology companies will carry out $250 billion (about KRW 368 trillion) in new direct investment to build and expand capabilities for producing advanced semiconductors, energy and artificial intelligence (AI), as well as innovation capacity, in the United States. Taiwan’s government said it will provide at least $250 billion in credit guarantees to spur additional investment by Taiwanese companies in the U.S., while supporting efforts to build out and expand a fully fledged semiconductor supply chain and ecosystem in the country. TSMC, Taiwan’s flagship chipmaker, has already completed six semiconductor plants in Arizona or plans to expand them, and is also expected to build five additional plants under this trade agreement. In return, the U.S. lowered the reciprocal tariffs applied to Taiwanese products to 15% from 20%, matching the rate for South Korea and Japan. Previously, South Korea and Japan reached agreements to cut reciprocal tariffs on the condition of $350 billion and $550 billion in investment in the U.S., respectively.

A Taiwanese company building a new semiconductor production facility in the U.S. will be exempted from product-specific tariffs imposed under Section 232 of the Trade Expansion Act for volumes up to 2.5 times the facility’s production capacity while construction is underway. Volumes beyond that will be subject to a preferential tariff rate under Section 232. In addition, a Taiwanese company that has completed a semiconductor production facility in the U.S. will be able to import into the U.S. volumes up to 1.5 times the facility’s production capacity without product-specific tariffs. Attention is therefore turning to how the agreement may affect South Korea’s semiconductor industry, which competes with Taiwan in chip exports to the U.S. A joint fact sheet released after a Korea-U.S. summit last November includes a provision that the U.S. will not treat South Korea less favorably than any agreement it may reach with other countries on semiconductor tariffs. The Commerce Department said, “The two sides will strengthen industrial infrastructure by developing a world-class industrial complex in the United States and position the country as a global hub for next-generation technologies, advanced manufacturing and innovation.”

◆ Comprehensive special counsel bill expected to pass plenary session today… ruling party to vote after ending filibuster

The National Assembly is expected to pass the second comprehensive special counsel bill in today’s (16th) plenary session led by the Democratic Party of Korea. The bill, titled the “Act on the appointment of a special prosecutor to uncover the truth about insurrection, foreign-instigated treason and state-affairs interference by Yoon Suk Yeol and Kim Keon-hee,” is intended to investigate areas left insufficiently examined and additional allegations beyond the three previously concluded special counsel probes (Kim Keon-hee, insurrection, and the Marine case). It covers investigations into alleged insurrection and foreign-instigated treason tied to the Dec. 3 martial law, as well as a broad range of alleged election and power interference involving former President Yoon and his spouse. The People Power Party began a filibuster after the bill was placed on the agenda at the previous day’s plenary session, protesting that it is a “special counsel meant to suppress the conservative opposition.” The Democratic Party plans to end debate by a vote at around 3:40 p.m. today, 24 hours after the filibuster began, and proceed to pass the bill.

◆ First verdict in Yoon ‘insurrection’ cases: ruling today on obstruction of arrest… live TV broadcast

A first-instance verdict will be delivered today (16th) in the case against former President Yoon Suk Yeol on charges including obstructing the Corruption Investigation Office for High-ranking Officials (CIO) from executing his arrest. It is the first court judgment among the eight trials Yoon is facing. The sentencing will be broadcast live on TV. The Seoul Central District Court’s Criminal Division 35 (Presiding Judge Baek Dae-hyun) will hold the sentencing hearing at 2 p.m. on charges including special obstruction of the performance of official duties and abuse of authority to obstruct the exercise of rights. Yoon was indicted in custody in July last year by a team led by Special Prosecutor Cho Eun-seok on allegations that on Jan. 3 last year he mobilized Presidential Security Service personnel to obstruct the CIO’s execution of an arrest warrant. He is also accused of infringing the martial-law deliberation rights of nine Cabinet members who were unable to attend by convening only some ministers and proceeding with a meeting that merely had the outward form of a Cabinet meeting at the time the Dec. 3 martial law was declared. He is additionally charged with drafting a false proclamation and then discarding it to make it appear as though martial law had been carried out based on a document countersigned by former Prime Minister Han Duck-soo and former Defense Minister Kim Yong-hyun after martial law was lifted. The indictment also includes allegations that he directed officials to distribute to foreign media a press guidance (PG—a government position for media response) containing the false claim that he “had not the slightest intention to destroy the constitutional order,” and that he ordered the deletion of classified phone communication records involving former Defense Counterintelligence Command chief Yeo In-hyung and others. At the sentencing hearing held on the 26th of last month, the special prosecutor sought a combined 10-year prison term: five years for special obstruction of official duties, three years for abuse of authority, and two years for drafting false official documents.

◆ Mostly clear, but dense morning fog… fine dust ‘bad’ in many areas

Friday the 16th will be mostly clear nationwide, but dense fog is expected in some areas through the morning. Dense fog with visibility under 200 m is forecast for the Seoul metro area, inland and mountainous Gangwon, Chungcheong, Jeolla and northern inland North Gyeongsang, while fog with visibility under 1 km is forecast for other inland parts of Gyeongsang, requiring caution for traffic safety. Morning temperatures will fall by about 5–10 degrees compared with the previous day in some areas, mainly in South Chungcheong and Jeolla. As of 5 a.m., temperatures were Seoul 1.2°C, Incheon 0.2°C, Suwon 1.1°C, Chuncheon -2.5°C, Gangneung 5.0°C, Cheongju -0.5°C, Daejeon -1.1°C, Jeonju 0.1°C, Gwangju 0.7°C, Jeju 5.7°C, Daegu 1.2°C, Busan 8.9°C, Ulsan 4.6°C and Changwon 5.2°C. Daytime highs will be 4–16°C, about 3–8 degrees above seasonal averages. Fine-dust levels are expected to be ‘Bad’ in the Seoul metro area, Yeongdong in Gangwon, Chungcheong, Gwangju, North Jeolla and Daegu, and ‘Moderate’ elsewhere. However, Daejeon, Sejong, North Chungcheong, Gwangju, North Jeolla and Jeju are expected to turn ‘Very Bad’ at night, North and South Gyeongsang ‘Bad,’ and Busan and Ulsan temporarily ‘Bad.’

Kim Ye-rang, Hankyung.com reporter yesrang@hankyung.com