President Donald Trump said that he will either renegotiate or terminate a "horrible" trade deal with South Korea, Reuters reported late Thursday.
The president also said he wants South Korea to pay for the $1 billion THAAD missile defense system, Reuters said.
Responses to Trump's comments soon arose, with an official from South Korea's automakers association telling Reuters that the group is now concerned about "the uncertainty" of the free trade agreement.
Shares in Hyundai Motor fell as much as 2.4 percent following Trump's comments. South Korea's won turned weaker on the comments.
Khoon Goh, head of Asia research at ANZ, told CNBC such a reaction is expected given " massive amounts of foreign inflows" into Asia, particularly Korea and Taiwan, over the last month "as trade tensions between the U.S. and China have eased off."
"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."
Still, he added that Trump's comments were likely "just a negotiating tactic."
An official from South Korea's Finance Ministry said that the U.S. administration had not yet requested anything on the free trade agreement.
And on the issue of THAAD payment, a foreign policy advisor to South Korea's presidential front-runner, Moon Jae-in, said that Seoul shelling out for the missile defense system is an "impossible option," according to Reuters.