[Morning Briefing] Rising New York Stock Exchange on Hopes of U.S. Tariff Negotiations... Rain on the Way to Work in the Capital Area

◆ New York Stock Exchange Rises on Hopes of Extended Tariff Negotiations

The New York Stock Exchange showed strength amid expectations that the U.S. administration's reciprocal tariff negotiation deadline, led by Donald Trump, would be extended. On the 26th local time, the Dow Jones Industrial Average rose 404.41 points (0.94%) to close at 43,386.84. The S&P 500 index closed at 6,141.02, up 48.86 points (0.80%), while the technology-focused Nasdaq Composite closed at 20,167.91, up 194.36 points (0.97%). The S&P 500 index hit an intraday high of 6,146.52, putting it on the verge of surpassing the previous record of 6,147.43 set on February 29. The Nasdaq was also close to breaking its intraday high of 20,204.58 set on December 16 last year. The White House's indication of a possible extension to tariff negotiation deadlines, along with reduced geopolitical risk in the Middle East, had a positive impact on investor sentiment. Especially, NVIDIA climbed 4.3% the previous day to reclaim the top spot by market capitalization, and then rose another 0.5% today to set a new all-time high in just one day.

◆ White House: "Reciprocal Tariff Exemption Deadline Could Be Extended"

The U.S. White House announced that there is a possibility of further extending the reciprocal tariff exemption deadline, currently set for the 8th of next month local time. In a briefing on the 26th, White House spokesperson Karoline Leavitt was asked about a possible extension and said, "It may be extended," adding, "However, that is a decision the president (Donald Trump) will make." The Trump administration, including South Korea among the 57 economic entities (56 countries + European Union), had implemented differentiated reciprocal tariffs on April 9, but decided to postpone them for 90 days (excluding China) after just 13 hours. The exemption period expires on the 8th of next month, and the White House has hinted at a possible delay. Currently, the United States is conducting negotiations with various countries, including South Korea, regarding tariff rates, trade balances, and removing non-tariff barriers. Previously, President Donald Trump stated on the 11th that he was open to extending trade negotiation deadlines with global counterparts but did not consider it necessary.

◆ U.S. Economy Shrinks by 0.5% in Q1 Due to Tariff Effects

It has been confirmed that the U.S. economy contracted in the first quarter of this year due to a temporary surge in imports. The Department of Commerce reported that the final figure for the U.S. GDP growth rate (annualized QoQ) in Q1 was -0.5%. This is a downward revision of 0.3% points from last month's preliminary figure of -0.2%. The Dow Jones consensus had predicted a 0.2% increase. This was the first quarterly contraction in the U.S. economy since Q1 2022 (-1.0%) in three years. Analysts say that the uncertainty surrounding tariffs prompted firms to temporarily boost imports to secure inventories, which in turn led to the Q1 decline. The contribution of imports to Q1 growth was as much as -4.66% points. Experts expect that as the temporary inventory boost disappears and imports plummet in Q2, the growth rate will rebound. According to the Commerce Department, downward revisions to personal consumption and exports were factors in lowering the growth rate in the final count. Although reduced imports acted as an upward factor, this did not offset the downside contributions. The personal consumption expenditure growth rate was revised down 0.7% points from 1.2% to 0.5%, while the export growth rate was revised down 2.0% points from 2.4% to 0.4%. The growth rate for private domestic demand (final sales to domestic private purchasers), which reflects fundamental demand in the U.S. economy, was revised down from 2.5% to 1.9%, the lowest since Q4 2022 (0.6%). The sharp downward revision in consumer and private expenditure growth rates suggests growing concern that the U.S. economy may be contracting faster than initially reported.

◆ U.S. Expected to Expand 25% Tariffs on Auto Parts, Impact Likely for Korean Industry

The U.S. Department of Commerce is expected to expand the types of auto parts subject to the 25% tariff. The International Trade Administration (ITA) under the Commerce Department announced on the 24th local time that it has established procedures to add new auto parts to those subject to a 25% tariff under Section 232 of the Trade Expansion Act. U.S. auto parts manufacturers can submit opinions to the Commerce Department on which parts should be subject to tariffs starting July 1. The department will accept industry requests every January, April, July, and October going forward. Earlier, President Trump had issued a proclamation on March 26 instructing the Commerce Department to establish procedures for adding parts to the list of auto and auto parts subject to the 25% tariff. When a U.S. manufacturer or association requests a tariff for a specific part, Commerce must make a decision within 60 days. Auto parts have been subject to an additional 25% tariff since May 3, and currently include engines, transmissions, powertrain components, and electronic parts. If Commerce expands the list of auto parts subject to tariffs, the cost burden will increase both for companies exporting parts to the U.S. and for those assembling vehicles in the U.S. with imported parts. As a result, Korea's auto parts industry is also expected to take a hit.

◆ Some Rain on the Morning Commute... Highs Up to 32°C Today

On this Friday morning, there will be some light rain in parts of the capital area during the commute. The daytime high will rise to around 30°C, making for a hot day. According to the Korea Meteorological Administration, rain is forecast for the northern part of Gyeonggi Province from early dawn to the morning, and occasional drops below 0.1㎜ in Seoul and the rest of the capital area. The central region and North Jeolla Province will be mostly cloudy, with the rest of the regions seeing intermittent clouds. Through the morning, dense fog with visibility under 200 meters is expected along the coast of South Jeolla Province, and fog under 1 km visibility is also expected along the west coast, inland areas, and the southern coast of South Gyeongsang Province. The meteorological agency advises extra caution for safe driving, particularly on bridges near the coast, rivers and lakes inland, in valleys, and at tunnel entrances and exits due to heavier fog there. Morning lows will range from 18°C to 23°C, similar to yesterday, with daytime highs expected to reach 26°C to 32°C. Fine dust concentration is expected to be at good to moderate levels nationwide, thanks to smooth atmospheric dispersion.

Kim So-yeon Hankyung.com reporter sue123@hankyung.com