U.S. President Donald Trump has once again reignited global trade tensions by threatening to hike tariffs on South Korean imports from 15% to 25%, in an announcement on Truth Social. In a move that caught Seoul by surprise on Jan. 26, 2026, Trump accused the South Korean National Assembly of failing to ratify a "Historic Trade Agreement" reached last year.
For investors, this sudden pivot creates immediate concerns about exposure to South Korean exporters, particularly those heavily reliant on the U.S. market, and by extension may potentially rattle the performance of exchange-traded funds (ETFs) that track the region's equities, which may lose billions if the tariff is imposed.
In light of these developments, keeping South Korean ETFs on your watchlist is a strategic necessity. However, before evaluating specific funds, we must first identify which industries —and which U.S.-traded Korean stocks — face the steepest uphill battle under a 25% tariff regime.
Beyond the immediate share price volatility, the ultimate question for investors is whether this threat is a precursor to a sustained trade war or a high-stakes 'pressure tactic' designed to force Seoul into fast-tracking its promised U.S. investments. By analyzing the long-term fundamentals and legislative maneuvers currently unfolding in the National Assembly, we can determine the true fate of South Korean ETFs and help you make an informed, data-driven decision for your portfolio.
Key Industries and Stocks Under Fire
The proposed tariff hike specifically targets three pillars of the South Korean economy, namely automobiles, pharmaceuticals and lumber, alongside all other "reciprocal" goods.
• Automotive: If tariffs are imposed, the auto industry, which accounts for 27% of South Korea’s exports to the United States (as mentioned by the Guardian), will be most affected. In particular, industry giants Hyundai Motor Co. HYMLF and Kia Corp. remain most exposed, with the former’s shares losing 4% in early Tuesday trade.
To this end, earlier in July 2025, some analysts estimated that a potential 25% U.S. tariff on imported automobiles would severely impact Hyundai Motor and Kia, causing more than $7 billion in losses to South Korea’s auto industry, jeopardizing jobs and profitability across the sector.
• Pharmaceuticals & Biotech: Major players like Samsung Biologics and Celltrion are in the crosshairs if the tariffs are imposed. While these firms have pursued "localization" strategies, such as Celltrion’s $1 billion bid for U.S. plants, direct exports of biosimilars remain vulnerable. As Trump aggressively pushes his "Make in America" stance for drugs, any delay in U.S. factory construction could trigger these heavy levies on these pharma companies.
• Semiconductors: While not explicitly named in the latest social media threat, the broader "reciprocal" tariff policy puts South Korean chipmakers like Samsung Electronics and SK Hynix on high alert. However, industry experts suggest the impact here may be limited as Washington balances tariff pressure with the need for stable tech supply chains.
Long-Term Outlook for South Korean ETFs
Despite the immediate volatility observed in the share price movement of major South Korean companies, the long-term outlook for South Korean ETFs remains anchored by Seoul's swift response to deal with this immediate threat through diplomacy. To pacify Washington, the South Korean government is already scrambling to fast-track the "Special Act on Managing Korea-US Strategic Investments" in February.
The proposed legislation would establish a framework for Seoul's planned $350 billion investment in the United States, a commitment central to last year's trade agreement. This massive investment pledge of South Korea in U.S. manufacturing remains a powerful bargaining chip.
While currency volatility in the nation has delayed some fund outflows for the time being, over a longer horizon, South Korea’s diversified export base, strong balance sheets at leading conglomerates, and ongoing structural demand for semiconductors, batteries, and advanced manufacturing support a more constructive view.
Therefore, once the country’s National Assembly clarifies the investment timeline, which is expected to be soon, the 15% "cap" on tariffs is likely to be restored, offering a potential recovery play for patient investors.
ETFs to Watch
Considering the aforementioned discussion, the following three South Korean ETFs are worth keeping in your watchlist:
iShares MSCI South Korea ETF EWY
This fund, with net assets worth $11.24 billion, offers exposure to 82 large and mid-sized companies in South Korea. Its top three holdings include Samsung Electronics (26.48%), SK Hynix (18.37%) and Hyundai Motors (3.11%). The Information Technology industry holds the maximum weightage (47.78%) in this fund.
EWY has surged 116.1% over the past year. The fund charges 59 basis points (bps) as fees. It traded at a volume of 5.03 million shares in the last trading session.
Franklin FTSE South Korea ETF FLKR
This fund, with net assets worth $316.2 million, offers exposure to 153 large and mid-sized companies in South Korea. Its top three holdings include Samsung Electronics (20.26%), SK Hynix (18.75%) and Hyundai Motors (3.13%). The Information Technology industry holds the maximum weightage (45.24%) in this fund.
FLKR has surged 106.5% over the past year. The fund charges 9 bps as fees. It traded at a volume of 0.23 million shares in the last trading session.
Matthews Korea Active ETF MKOR
This is an active fund, with net assets worth $85.9 million, which offers exposure to 45 companies in South Korea that are capable of sustaining growth. Its top three holdings include Samsung Electronics (24.9%), SK Square (4.6%) and SK Hynix (4.4%). The Information Technology industry holds the maximum weightage (41%) in this fund.
MKOR has soared 87.5% over the past year. The fund charges 79 bps as fees. It traded at a volume of 0.02 million shares in the last trading session.
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Hyundai Motor Co. (HYMLF): Free Stock Analysis Report iShares MSCI South Korea ETF (EWY): ETF Research Reports Franklin FTSE South Korea ETF (FLKR): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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