South Korea’s industry is being rattled by US President Donald Trump’s threat of imposing heavy tariffs on automobiles and his vow to revoke billions of dollars in subsidies for chip manufacturers investing in the United States.
At a forum in Seoul last week, an executive from the semiconductor association remarked that Trump’s promise to discard the CHIPS Act “doesn’t make sense.” Samsung Electronics had previously reached an agreement with Joe Biden’s administration for a $4.75 billion subsidy, part of a larger investment exceeding $37 billion in semiconductor manufacturing facilities in Texas.
Jun Jae-min, an executive at the Korea Semiconductor Industry Association, stated, “We are witnessing the US levy tariffs on goods, followed by a move to potentially scrap the CHIPS Act, which is deeply concerning to me.”
“Although it lacks logical basis, there’s little we can do. Our only recourse is to urge the [South Korean] government to intensify efforts to shield us from harm. It’s quite unnerving,” Jun added.
In February, Trump declared his intention to implement a 25% tariff on imported automobiles starting in April. Responding to this, a South Korean automobile association executive voiced his concerns, indicating that vehicle manufacturers in the country were contemplating expanding their US production to circumvent the tariffs.
Kim Ju-hong, an executive at the Korea Automobile and Mobility Association, expressed, “We are living with daily anxiety due to Trump’s recent tariff announcement.” He further noted, “Our annual exports to the US total 1.49 million cars. Faced with a potential 25% tariff, our only option is to shift some production locally.”
During a conference call in January, Hyundai Motor mentioned that it could fulfill 70% to 80% of its US sales through its American factories. As South Korea’s premier automaker, with an existing plant in Alabama and a new facility in Georgia that commenced operations in October, Hyundai plans to eventually increase its capacity by 300,000 to 500,000 units annually. Hyundai’s yearly sales in the US hover around 1 million vehicles.
Analysts are advising South Korea to brace for potential US tariffs on chips, automobiles, and other goods, emphasizing trade’s critical role in averting a recession.
BMI, a research division of Fitch Solutions, highlighted in a report released on Friday, “The application of tariffs to Canada and Mexico, notwithstanding the USMCA (United States-Mexico-Canada Agreement), suggests that the United States-Korea Free Trade Agreement (KORUS) provides minimal assurance that South Korea will remain unaffected.”
Dave Chia, an associate economist at Moody’s Analytics, commented in a note last week, “Alterations in US tariffs could substantially impact South Korea’s trade in the foreseeable future.”
“South Korea’s reliance on exports is a growing worry. Exports are set to encounter hurdles that might trigger an economic deceleration this year,” he cautioned.
The Korean economy expanded by 2.0% in 2024. However, the Bank of Korea projects that growth in Asia’s fourth-largest economy will decelerate to 1.5% this year, attributing this slowdown to Washington’s tariff policies and the political unrest that has gripped the nation since late last year.
