South Korean shares closed lower on Tuesday, as investors remained skeptical about a favorable trade deal with the US ahead of the Aug. 1 deadline.

Finance Minister Koo Yun-cheol and Trade Minister Yeo Han-koo will head to Washington this week to participate in "2+2" high-level trade talks with the US. Koo and Yeo will hold talks with US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer.

If a trade deal isn't struck by Aug. 1, the US will impose 25% reciprocal tariffs on South Korean goods from that date, in addition to the existing 25% duties on automotive and steel imports.

The Korea Composite Stock Price Index or Kospi fell by 40.87 points, or 1.27%, to end at 3,169.94. The Kosdaq also decreased by 8.72 points, or 1.06%, to close at 812.97.

In economic news, producer prices in South Korea increased 0.5% in June from a year earlier, according to preliminary data from the Bank of Korea on Tuesday.

The on-year gains were primarily driven by higher costs across agricultural, forestry & marine products, electric power, gas, water and waste, and services. The prices for manufacturing products, however, declined by 0.9%.

On a month-on-month basis, producer prices rose 0.1% in June.

In corporate news, HD Hyundai Electric (KRX:267260) declared a second-quarter cash dividend of 1,900 won per common share, with a total dividend amount of 68.39 billion won, according to a Tuesday regulatory filing with the Korea Exchange.

The dividend record date is June 30, and the scheduled payout is on Aug. 5.

Shares of HD Hyundai Electric fell more than 5% at market close.