The Korean economy could lose momentum for growth, stifled by the potential reclaimed victory of former U.S. President Donald Trump in the November election, observers said Sunday.
Central to the collective concern is the prospect of up to a 10 percentage point increase in tariffs on U.S.-bound goods manufactured by Korea’s leading export-driver industries. This includes the car, high-tech artificial intelligence (AI) and battery industries, a considerable portion of which remain the chief beneficiaries of expanded U.S. government subsidies under the Inflation Reduction Act and the CHIPS and Science Act.
Further advancing the view is Korea’s record-high trade surplus with the United States, certain to embolden Trump’s protectionist drive as best encapsulated by “America First,” an overarching policy that prioritizes the interests of American workers.
According to data from the Ministry of Trade, Industry and Energy and the Korea International Trade Association, Korea’s trade surplus with 한국을 the U.S. stood at $28.7 billion (39.9 trillion won) in the first six months of this year. The 55.1 percent year-on-year increase far surpassed the country’s trade surplus total of $23.1 billion in the same period.
This year’s figure is expected to reach a new all-time high of $50 billion this year, breaking last year’s record of $44.4 billion. The U.S. emerged as the largest trading partner of Korea last December, upending two decades of China’s reign.
“Nothing good can come of it from the trade perspective,” said a report released by the Korea Institute for International Economic Policy (KIEP).
Trump pledged to impose a tariff of between 60 percent and 100 percent on China-manufactured goods, and the rate for the U.S.’ trading partners will soar as high as 10 percent, up from the current average of 3 percent.
Renegotiation of the Korea-U.S. Free Trade Agreement (KORUS FTA) could be on the horizon, compounded by a sudden climb in the prices of goods.
Electric vehicles and battery manufacturers may no longer be eligible for U.S. government subsidies, certain to dent the sectors’ robust sales of the past year. The consequent reduced cost advantages will translate to lower growth output for Korea.
“Trump has pinpointed auto and auto parts makers of Korea, Japan, Europe, Mexico and Canada as the driver of the U.S. auto sector’s trade deficit,” the report said.
Major demands are expected, as indicated by the automotive-related sectors constituting about 70 percent of Korea’s trade surplus with the U.S.
According to the trade ministry data, car-related exports came to $19 billion in the first half, up 28.9 percent from the year before.
The spike in Korea’s trade surplus with the U.S. is explained by Korea’s exports to the U.S. surging far faster than its imports from the U.S.
Also to Korea’s advantage was the U.S.-led global supply chain reorientation to the exclusion of China, straining the top competitor of the U.S. in the key industries of semiconductors and rechargeables, as well as power, telecommunications and port infrastructure.