By Jihoon Lee and Trevor Hunnicutt
GYEONGJU, South Korea (Reuters) -A trade deal reached by the U.S. and South Korea on Wednesday at their leaders' summit is a best-case compromise to untangle a deadlock in tariff talks that had raised questions about the Asian country's export-heavy economy, analysts said.
U.S. President Donald Trump and South Korean officials announced the leaders had finalized details of their fraught trade deal on how to structure a $350 billion investment in the U.S. in return for cuts to import duties on South Korean goods.
Central to the agreement was to set tariffs on Korean auto and auto parts at 15%, down from current 25%, to put them on par with their Japanese competitors. The U.S. is a major market for Hyundai Motor and affiliate Kia Corp, which are together the world's third largest carmakers by sales.
"We appreciate the constructive efforts of the U.S. administration and the Korean government to resolve business uncertainty and support a positive future trade environment for both countries," Hyundai Motor Group said in a statement.
WON RISES FOLLOWING ANNOUNCEMENT
The deal ensures the companies can grow their commitment in the U.S., creating jobs and expanding localisation that would help the United States prosper, it said.
The announcement of the deal by Trump and South Korean President Lee Jae Myung, later confirmed by South Korean presidential aides, lifted the Korean won by 0.54% against the dollar by 1001 GMT.
South Korean and U.S. officials have wrangled over dozens of meetings on how to structure the $350 billion in investment promised by South Korea in a way that would not jeopardize the American ally's financial markets.
"It appears there was a consensus that further delay would not be helpful to either country," said Heo Yoon, an economics professor at Sogang University in Seoul.
For Korea, the continued uncertainty surrounding its currency and the carmakers' ability to compete in the U.S. market likely factored as a decisive pressure, he said.
Lee has said an upfront outflow of $350 billion in cash as earlier demanded by Trump would seriously destabilize South Korea's currency. Wednesday's agreement laid out a plan for $200 billion in investment spread over years not to exceed $20 billion a year. The remaining $150 billion would be invested in rebuilding America's shipbuilding.
"South Korea came out better than the worries in the financial markets," said Moon Hong-cheol, an economist at DB Securities in Seoul. While uncertainties remain in implementing the deal, the won is likely to gain a gradual boost, he said.
(Reporting by Trevor Hunnicutt, Jihoon Lee, Ju-min Park in Gyeongju, Cynthia Kim, Jack Kim, Youn Ah Moon in Seoul; Editing by Ed Davies, Clarence Fernandez and Alison Williams)
