In early trading on the 13th, the Korea Composite Stock Price Index (KOSPI) tumbled on renewed fears of a U.S.-China trade dispute but is showing signs of calming. Buying appears to have returned on the possibility of "TACO trade" (Trump Always Chickens Out trade), referring to transactions driven by expectations that Donald Trump will always get scared and back down.
As of 10:55 a.m. that day, the KOSPI was down 34.64 points, or 0.96%, from the previous trading day at 3,575.96. The index opened at 3,547.56, down 63.04 points, or 1.75%, and at one point in intraday trade widened its loss to as much as 2.44%.
Top market-cap stocks such as Samsung Electronics (-2.12%) and SK hynix (-3.5%) remain lower, but the losses have narrowed from early trading. The Kosdaq reversed higher, up 0.2% at 861.24 in transactions.
The rebound in the domestic stock market is seen as stemming from signs of a possible "TACO trade." The TACO trade is an investment strategy that treats market declines caused by the president's tariff threats (TACO trade, Trump Always Chickens Out) as buying opportunities.
Choi Seol-hwa, a researcher at Meritz Securities, said in a report that day, "In 4–5 months as well, the two countries already experienced a 'tariff chicken game,'" and explained, "High tariffs hurt both the United States and China more than they help, and in practical terms were merely a pressure tool for negotiations." She added, "This time, the situation is not much different."
However, the won-dollar exchange rate against the U.S. dollar remains a variable. A continued weak won could spur foreigners' profit-taking. The won-dollar rate is currently trading at 1,427.1 won, up 0.1 won from the previous trading day, in transactions.
The sharp KOSPI drop early that day was due to a plunge in the three major New York stock indexes on the 10th (local time) as concerns over a U.S.-China trade dispute resurfaced.
U.S. President Trump said he would impose an additional 100% tariff on Chinese imports starting Nov. 1, on top of tariffs currently in place, in response to China's move to tighten controls on rare earth exports. The Dow Jones Industrial Average fell 1.9%, while the S&P 500 and the Nasdaq slid 2.71% and 3.56%, respectively.
Over the weekend, however, China issued a position under the name of the Ministry of Commerce Spokesperson saying it is "not afraid but does not seek a fight," and Trump also stepped back, writing on his social media that "the highly respected President Xi Jinping only went through a brief difficult moment" and that "the United States wants to help China."