He will either renegotiate or terminate a “horrible” trade deal with South Korea, said U.S. President Donald Trump, reported Reuters.

Reuters also said that for the THAAD missile defense system, the president also said he wants South Korea to pay for the $1 billion.

The group is now concerned about “the uncertainty” of the free trade agreement, said an official from South Korea’s automakers association to Reuters as responses to Trump’s comments soon arose.

While South Korea’s won turned weaker on the comments, shares in Hyundai Motor fell as much as 2.4 percent following Trump’s comments.

“As trade tensions between the U.S. and China have eased off”, such a reaction is expected given ” massive amounts of foreign inflows” into Asia, particularly Korea and Taiwan, over the last month, said Khoon Goh, head of Asia research at ANZ.

“So investors are thinking that perhaps the worst on trade tensions with Asia is not going to happen,” he said. “And all of a sudden, this has come from a bit of a left field, so I think what we’re going to see now is markets perhaps need to start pricing a little bit more potential of trade tensions between the U.S. and Korea.”

Trump’s comments were likely “just a negotiating tactic”, he added.

The U.S. administration had not yet requested anything on the free trade agreement, an official from South Korea’s Finance Ministry said.

Seoul shelling out for the missile defense system is an “impossible option,” said a foreign policy advisor to South Korea’s presidential front-runner, Moon Jae-in, on the issue of THAAD payment, reported Reuters.

Yonhap news agency reported that no change to its position that the U.S. would bear the cost of THAAD deployment was the official stand of the South Korean Defense Ministry. The U.S. military had begun transferring parts of THAAD into a planned deployment site in South Korea, Yonhap said earlier this week.

Designed to protect South Korea and Japan from missile attack, the system, the Terminal High Altitude Area Defense, could be operational as soon as summer 2017. North Korea and its unpredictable leader Kim Jong Un make a habit of regularly threatening neighbors and possess nuclear weapons.

THAAD intercepts and destroys the missile before it descends onto its target after it uses radar to track when a ballistic missile is launched.

Now, as U.S. rhetoric takes a sharper tone against the North, tensions are on the rise in the Korean Peninsula and Trump’s hard stance comes amidst such an environment.

In fact, “there is a chance that we could end up having a major, major conflict with North Korea. Absolutely,” Trump also told Reuters on Thursday. Still, he would prefer a peaceful resolution to the situation in the region, the president had emphasized to the news outlet.

An effective way to pressure China to help deescalate tensions with North Korea could be the THAAD, some have theorized.

“We planted this high-end air defense system in South Korea that has obvious implications for the Chinese because the radar fans go all the way through Manchuria,” former CIA Director Michael Hayden said this month, explaining that such a move will force Beijing to address the “bad toothache” of Pyongyang, according to Yonhap.

(Adapted from CNBC)

Categories: Economy & Finance, Geopolitics, Strategy, Uncategorized