[Yonhap Photo]
South Korea was put on guard Wednesday to curb market volatility as a surprise election victory by Republican candidate Donald Trump advocating trade protectionism sent a shock wave through global financial markets.
Amid growing market jitters over a possible change in US trade policies under the Trump administration, the benchmark KOSPI shed 45 points, or 2.25 percent, to 1,958.38. The local currency weakened to 1,149.5 won against the greenback.
"Inevitably, the outcome of the US election will increase volatility in our financial markets," Yim Jong-yong, head of the Financial Services Commission, told a meeting of financial officials.
South Korea needs a "water-tight" defensive net to guard South Korea's economy and financial system against any external shock, he said, urging banks to acquire enough foreign exchange reserves.
Financial officials and experts have expressed concern about downside risks such as heightened trade protectionism and an interest rate hike in the United States.
As preemptive leveraging, foreign investors has been withdrawing from South Korea because of growing uncertainties over political turmoil at home, a prolonged business slump, and the impact of the US election and higher US interest rates.
Analysts predicted Trump's victory would have a limited short-term impact on financial markets. They are more concerned about a change in US trade policies as Trump displayed negative views especially about the Free Trade Agreement (FTA) between Seoul and Washington that took effect in 2012.
Trump advocates strong protectionism, describing the FTA as a "destroyer" of US jobs, especially in the auto industry.
In a speech in Detroit, Trump stepped up an attack on the FTA, calling it a "perfect" example of "broken promises". "Let's talk about South Korea for a moment, because it so perfectly illustrates the broken promises that have hurt so many American workers."
Definitely, his protectionist tone will be reflected in trade policies and may affect South Korea's trade surplus with the United States that grew from $15.2 billion in 2012 to $25.8 billion in 2015.
Finance Minister Yoo Il-ho agreed that South Korea should be prepared to cope with enhanced protectionism in the United States and possible calls for re-negotiations on the free trade pack.
"We must try hard to persuade (US) while working out countermeasures over possible FTA re-negotiations," he said, expressing his hope that Trump may not push for a radical change in trade policies.
"Judging from our experience, there has been a gap between pledges made during the campaign trail and the actual implementation of policies," Yoo said.
The state-run Korea Trade-Investment Promotion Agency said in a report that a Trump administration would deal a blow to exports of textiles and auto parts.
Instead, it may open new doors for South Korean firms as the business magnate is expected to launch massive social infrastructure projects to spur economic growth, the agency said.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
![[Coronavirus] Moon receives Trumps request for diagnostic reagents](https://image.ajunews.com/content/image/2020/03/25/20200325142129178702.jpg)
