Seoul: Global investment banks assessed Friday that the trade deal reached between Seoul and Washington this week has eased uncertainties and is expected to provide an upward momentum to the South Korean stock market. On Wednesday, U.S. President Donald Trump agreed to reduce "reciprocal" tariffs on South Korea to 15 percent and also lower U.S. tariffs on South Korean auto exports to 15 percent. The two countries also agreed to split Seoul's promised US$350 billion investment into $200 billion in cash, to be paid in installments with an annual cap of $20 billion, and a separate $150 billion fund dedicated to supporting the U.S. shipbuilding industry.
According to Yonhap News Agency, a report published by the Korea Center for International Finance (KCIF) indicates that Morgan Stanley and Co. LLC has raised its forecast for South Korea's gross domestic product (GDP) next year from 1.5 percent to a maximum of 1.7 percent. The New York-based investment bank stated that the Lee-Trump summit helped eliminate uncertainties in the country's economy and foreign exchange market. "The $20 billion annual cap on Seoul's investment pledge has reduced concerns over large-scale dollar outflows," the bank was quoted as saying in the report. "U.S. auto tariff reduction will also help restore the price competitiveness of Korean cars."
Goldman Sachs Group Inc. estimated that changes to U.S. auto tariffs will reduce the cost burden stemming from U.S. tariffs by about 40 percent for Hyundai Motor Co. and its sister company Kia Corp. Citigroup Inc., however, noted that the planned direct U.S. investments by local auto, semiconductor, and battery companies could put downward pressure on the local currency.