Global markets were sent reeling on February 3rd as the US tariff war, initiated by President Trump, began to take effect.

The Kospi plummeted by over 2.5%, led by a sharp decline in the shares of battery and semiconductor companies, which are directly impacted by the tariffs. The won-dollar exchange rate soared to over 1,470 won during the day. The market is expected to remain volatile in the near term, with the extent of the impact depending on the intensity of the tariff measures.

The Kospi closed down 63.42 points (2.52%) at 2453.95, after plunging as much as 3.16% to 2437.61 during the day. The Kosdaq also fell by 24.49 points (3.36%) to close at 703.80.

Virtual assets also plummeted. Bitcoin fell by 6.21% to $94,175.23 as of 3:48 pm (GMT), according to CoinMarketCap. Ethereum (-19.33%) and Ripple (-20.91%) also saw sharp declines.

On the other hand, the US dollar, a safe-haven asset, strengthened. The won-dollar exchange rate closed at 1467.2 won in the Seoul foreign exchange market, up 14.5 won from the previous session. It also rose to 1472.5 won during the day, breaking the 1,470 won level for the first time in about a month. The domestic gold price (based on the KRX Gold Market) also hit a record high, closing up 3.6% at 138,000 won per gram.

The increased volatility in the financial markets is attributed to President Trump's imposition of tariffs on Canada, Mexico, and China on February 1st (local time), which has made the risk of a trade war a reality.

The high-intensity tariff measures against allies, just two weeks after his inauguration, have fueled concerns that his tariff policies and pledges, such as the repeal of the Inflation Reduction Act (IRA), could all become reality, sending shockwaves through the financial markets. Shares of SK Hynix and Samsung Electronics fell by 4.17% and 2.67%, respectively, from the previous trading day. Kia (-5.78%), which has a production plant in Mexico, LG Electronics (-7.13%), and battery stocks, which would be hit by the repeal of the IRA, also fell sharply.

"The pressure of tariffs and trade on the six major importing countries of the US, including Japan and Korea, is likely to intensify in the second quarter," said Kim Yong-gu, a researcher at Sangsangin Securities. "The Kospi's box-type fluctuations in the first half of the year are inevitable."

Meanwhile, Asian stock markets also fell across the board, with the specter of a tariff war looming before the aftershocks of the Deepseek incident subsided. Japan's Nikkei 225 index closed down 1052.40 points (2.66%) at 38520.99 points. Taiwan's stock market was the hardest hit among Asian countries, falling more than 5% at one point in the morning before closing down 3.53% from the previous trading day.

The Euro Stoxx 50 futures index fell 2.68% and the German DAX futures index fell 2.4% on the news that the US would soon impose tariffs on the European Union (EU). The Canadian dollar, which is directly affected by the tariffs, rose to its highest level in 22 years against the US dollar (1.4735 Canadian dollars per US dollar) during the day.