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Do Tariffs and Geopolitical Risk Matter? Evidence from South Korea's Large-Cap Companies

Author

Listed:
  • Grébel Szabolcs

    (Corvinus University of Budapest)

  • Pesuth Tamás

    (Seoul National University)

Abstract

South Korea's stock market ranked among the top-performing emerging markets in early 2025, despite operating within a volatile environment characterized by elevated geopolitical and trade policy risks. Understanding the influence of these risks is critical, particularly following the U.S. tariff announcements in 2025, which generated substantial market turbulence. This study applies an event study to assess the impact of the April tariff announcements and the subsequent 90-day suspension in the KOSPI 50 Index. Abnormal returns were estimated for each company and at the sector level for both events. The results indicate that the South Korean market responded negatively to the tariff announcements, with significant effects in a limited number of sectors, including both export-oriented and financial sectors. Following the suspension of tariffs, the consumer staples, manufacturing, and financial sectors demonstrated outperformance based on Cumulative Average Abnormal Returns (CAAR). Small-cap firms outperformed large-cap firms during the shock period at the index level.

Suggested Citation

  • Grébel Szabolcs & Pesuth Tamás, 2026. "Do Tariffs and Geopolitical Risk Matter? Evidence from South Korea's Large-Cap Companies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 41(3), pages 601-622, September.
    • Handle: RePEc:ris:integr:023566
    DOI: 10.11130/jei.2026005
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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