The warning from U.S. President Donald Trump about a massive increase in tariffs on China immediately sent a shockwave through the financial markets, causing the won/dollar exchange rate to soar and briefly surpass the 1,430 won mark again. This is the first time the rate has breached this level since May 2nd, a direct reflection of renewed concerns over the escalating U.S.-China trade conflict heavily impacting the South Korean foreign exchange market.
Trump Hints at Xi Meeting Cancellation and Warns of 'Tariff Bomb'
The surge in the exchange rate was triggered by a post from President Donald Trump on his social media platform, 'Truth Social.' President Trump strongly criticized China's recent move to strengthen its export controls on rare earth minerals, calling it "holding the entire world hostage." Furthermore, he cast doubt on his planned summit with Chinese President Xi Jinping at the APEC (Asia-Pacific Economic Cooperation) meeting, which is scheduled to take place in South Korea in two weeks, stating, "There seems to be no reason for it now," thus hinting at the possibility of the meeting falling through.
Accompanying this, President Trump warned that he was "seriously considering several countermeasures, including a massive increase in tariffs on Chinese goods entering the United States." This statement was interpreted as a powerful signal that the U.S.-China trade war, which had been in a truce, could re-escalate.
Global Financial Markets Roil... New York Stock Market Plummets
Global financial markets reacted instantly and violently to President Trump's remarks. In particular, all three major indices on the New York Stock Exchange suffered sharp declines. The NASDAQ index, which is technology-heavy, fell by the mid-to-high 2% range, indicating that market uncertainty had reached an extreme high. Experts diagnosed that President Trump's unpredictable actions were causing major confusion in the market.
Won/Dollar Exchange Rate Soars to 1,432.00 Won in Overnight Trading
Even after the main closing of the Seoul foreign exchange market, the won/dollar exchange rate remained volatile in overnight trading. The rate, which was around the 1,420 won mark, sharply surged when President Trump's remarks were made during the New York morning session, peaking at 1,432.00 won at one point. This is the highest level since May 2nd.
Ultimately, the dollar-won exchange rate settled at 1,427.00 won as of 2 AM on the 11th (KST), which is 6.00 won higher than the previous weekly closing rate (1,421.00 won). However, the intraday high of 1,432.00 won has heightened the foreign exchange authorities' vigilance regarding market intervention. The yen-won cross rate was 936.39 won per 100 yen, and the offshore dollar-yuan (CNH) rate was 7.1401 yuan. This re-confirms the immense impact of escalating U.S.-China trade tensions on the South Korean foreign exchange market.
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