Trump's Tariff Bomb Causes Won Value to Drop… "Expected to be in the Early 1470 Won Range During the Day"

Won-Dollar Exchange Rate Opens at 1471 Won

Preference for Safe Assets Strengthens

On the 3rd, the won-dollar exchange rate is showing an upward trend due to the announcement of reciprocal tariffs by the U.S. Donald Trump administration. Concerns that the tariff rate is higher than expected and that a global tariff war will begin in earnest are dragging down the value of the won, which is classified as a risky currency.

On this day, the won-dollar exchange rate opened at 1471 won, up 4 won and 40 jeon from the previous day's closing price of 1466 won and 60 jeon. It soared 8 won and 50 jeon from the closing price of 1462 won and 50 jeon at 2 a.m. The shock of the Trump administration's reciprocal tariffs is strengthening the preference for safe assets.

U.S. President Donald Trump officially announced on the 2nd (local time) that a 25% reciprocal tariff will be imposed on all products produced in South Korea and imported into the United States. This reciprocal tariff consists of individual tariffs on countries deemed to have large export volumes to the U.S. and unfavorable tariff structures, and will be implemented on the 5th and 9th of this month, respectively.

Major U.S. trading partners, including South Korea, China, Japan, the European Union (EU), and Taiwan, have been subjected to reciprocal tariffs higher than the basic tariff.

The reciprocal tariff rates by country are △China 34% △EU 20% △Vietnam 46% △Taiwan 32% △Japan 24% △India 26% △Thailand 36% △Switzerland 31% △Indonesia 32% △Malaysia 24% △Cambodia 49% △UK 10% △South Africa 30%, etc.

President Trump criticized other countries on this day, saying, "They have imposed massive tariffs on American products and created absurd non-monetary barriers to destroy industries," adding, "American taxpayers have been extorted for over 50 years, but that will no longer happen."

Analysts say that the higher-than-expected tariff rate has led to a drop in the value of the won, classified as a risky currency. Seo Sang-young, a researcher at Mirae Asset Securities, said, "After President Trump's announcement of reciprocal tariffs, the dollar and yen showed renewed strength," adding, "The price of gold surged, and after-hours futures in the stock market fell, expanding the preference for safe assets." He continued, "This is because it is estimated that the universal tariff of 10% has been imposed, increasing the possibility of a slowdown in the growth rate of countries around the world."

As foreign investors continue to sell off in the stock market, the won-dollar exchange rate is expected to continue its upward trend during the day. As of 9:35 a.m., foreign investors have net sold 277.3 billion won worth of stocks.

Min Kyung-won, a researcher at Woori Bank, said, "As foreign investors' net selling continues in the domestic stock market today, investment sentiment for won assets will be sluggish," adding, "The sharp drop in the value of the yuan after the announcement of reciprocal tariffs may also support the rise in the exchange rate as long play (dollar buying) resumes offshore."

However, the foreign exchange authorities' vigilance against micro-adjustments and the waiting volume of high-point sales by exporters are expected to support the upper end of the exchange rate, maintaining the won-dollar exchange rate in the early to mid-1470 won range during the day.

Researcher Min said, "The waiting volume of high-point sales by exporters will play a role in limiting the upward volatility of the exchange rate," adding, "There is also the possibility of micro-adjustments by the foreign exchange authorities to curb the overheating of long sentiment." He continued, "Today, the tariff shock from Trump will be significant in the short term, but measures to ease volatility in the foreign exchange market will mitigate it."

Goh Jung-sam, Hankyung.com reporter jsk@hankyung.com