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Trump’s Tariff Threat: What It Means for Korea’s Auto Exports

Daniel Kim Views  

Predictions have surfaced that if former U.S. President Donald Trump were reelected, the U.S. could impose additional tariffs on Korean-made vehicles, citing the U.S.’s trade deficit with South Korea.

The Industrial Research Institute stated in a report titled The Impact of the U.S. Election on the Korean Automobile Industry on the 10th, “The Korean automobile industry needs a strategy to diversify its export structure, which is heavily dependent on the U.S. and adjust the level of exports and local production in the U.S. market.”

According to the report, the U.S. accounted for 42.9% of Korea’s automobile exports last year. The dependence on the U.S. for exports of finished vehicles was 45.4%, and for electric cars, it was 35%. The growth rate of U.S. electric vehicle exports from 2019 to 2023 was an impressive average of 88% per year.

The Industrial Research Institute emphasized, “The automobile industry is very important to the U.S., so there can be many changes depending on political tendencies and the characteristics of the president. We need to pay attention to changes in automobile policy after the U.S. election.”

If President Joe Biden were to be reelected, it is expected that Korean companies’ sales of electric vehicles would flourish. Environmental regulations increasing the demand for electric vehicles in the U.S. are predicted to impact Korean cars, which have a positive competitive advantage.

On the other hand, if Trump were to be reelected, it is anticipated that automobile exports to the U.S. would be negatively affected. The Korean automobile industry recorded a trade surplus of $28.9 billion with the U.S. last year.

The Industrial Research Institute has speculated that if Trump is reelected, there is a significant possibility that Korea will be included in the countries subject to universal tariffs, ostensibly to protect the U.S. automobile industry. Such tariffs could reduce Korean automobile exports as production shifts to local markets in the U.S. to avoid these tariffs.

South Korea must prepare for the potential risks associated with the U.S. election, as changes in U.S. policy or market trends could significantly impact Korea’s automobile exports. Given the uncertainties post-COVID-19, diversifying markets beyond the heavily relied-upon U.S. market is recommended. Expanding into Southeast Asia, the Middle East, and Eastern Europe could help reduce dependency on any single market and decrease economic instability.

Kim Kyung Yu, a senior researcher at the Industrial Research Institute, suggested, “We need to secure competitiveness in various carbon-neutral technologies such as hybrid cars and hydrogen electric cars, in addition to electric vehicles, to respond to changes due to regulations, market, and supply chain factors.” He also emphasized, “As the policy of excluding China from the electric vehicle supply chain is enhanced, we need to strengthen the construction of our supply chain to respond to this.”

Daniel Kim
content@viewusglobal.com

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