Bessent Sees US, Korea Trade ‘Understanding’ by Next Week: Navigating Reciprocal Tariffs and Economic Stakes

The U.S. and South Korea stand on the brink of a potential breakthrough in their trade negotiations, with Treasury Secretary Scott Bessent expressing confidence that an “understanding” can be reached by early May. The stakes are high: avoiding a 25% tariff threat that could disrupt global supply chains and consumer markets. But what does this mean for investors?

The Backdrop: A Delicate Balancing Act

The talks, part of the first U.S.-South Korea “2+2” trade consultations, emerged from President Trump’s April 2 announcement of “reciprocal” tariffs targeting over 180 countries. While the White House paused the 25% threat on South Korea on April 9—replacing it with a 10% “baseline” tariff—the clock remains ticking. The July 8 deadline looms, with tariffs threatened to be reimposed as early as two weeks prior if no progress is made.

South Korea has sought to preempt this by addressing U.S. concerns about non-tariff barriers, digital trade, and agricultural access. The Seoul delegation, led by Finance Minister Choi and Trade Minister Ahn Duk-geun, has tabled detailed responses to U.S. grievances, emphasizing regulatory transparency and cooperation in sectors like shipbuilding and energy.

What’s at Stake: Economic and Market Implications

For investors, the outcome could sway equity markets, particularly in automotive and tech sectors. South Korea’s reliance on global trade—its exports account for nearly 50% of GDP—means tariffs could crimp corporate profits. Meanwhile, U.S. industries like automotive and semiconductors, which face rising competition from South Korean firms, could see relief or further pressure depending on the deal.

Hyundai, a bellwether for South Korea’s automotive sector, has already seen volatility tied to trade tensions. A failure to resolve tariffs could amplify this. Conversely, a deal might stabilize investor confidence, as seen in past agreements like the U.S.-Mexico-Canada trade pact.

The U.S. Position: Reciprocity, Not Symmetry

Bessent’s approach hinges on Trump’s “reciprocal tariff” framework, which demands parity between U.S. tariffs and those levied on American exports—not an exact mirror. This leaves room for compromise. For instance, while the U.S. imposes a 25% tariff on South Korean steel, Seoul might agree to lower barriers on U.S. agricultural goods in exchange for exemptions on automobiles or tech components.

However, the U.S. maintains leverage through its 10% baseline tariff and ongoing duties on steel, aluminum, and autos. South Korea’s negotiators must walk a fine line: addressing U.S. concerns without ceding too much on domestic industries.

Historical Precedent and Investor Takeaways

Past trade spats offer clues. In 2018, U.S. tariffs on steel and aluminum caused a 5% dip in South Korea’s KOSPI index, but the market rebounded once exemptions were granted. Similarly, a 2020 automotive deal averted tariffs, boosting investor sentiment.

Current negotiations could follow a similar path. If an understanding is reached by next week, markets may rally, particularly in sectors like semiconductors (Samsung Electronics) and shipbuilding (Samsung Heavy Industries). Failure could trigger a 3–5% correction in both the KOSPI and S&P 500, as companies brace for higher input costs.

Conclusion: A Fragile Equilibrium

An agreement by May would likely avert the immediate threat of 25% tariffs, but the U.S. “reciprocal” framework ensures ongoing scrutiny. For investors, the key is to balance short-term optimism with long-term caution.

Economically, South Korea’s GDP could shrink by 0.3–0.5% if tariffs are reimposed, while U.S. consumers might face a 1–2% rise in prices for imported goods. The path of least resistance—exemptions for critical sectors and regulatory concessions—appears most probable, given both nations’ interdependence.

Investors should prioritize companies with diversified supply chains, such as Samsung (which has manufacturing hubs in both nations), and monitor the KOSPI and automotive sector ETFs for early signals. While Bessent’s optimism is warranted, the final deal’s specifics will determine whether this “understanding” becomes a lasting pact or another chapter in a recurring trade saga.