Korea Inc. bracing for Trump

Donald J. Trump’s stunning victory in the U.S. presidential election has sent Korean companies and economic analysts scrambling to assess how the president-elect’s economic policies might affect their businesses.

While export-oriented companies will likely face headwinds due to strengthened protectionism, Korea’s information technology and semiconductor manufacturers expect to remain relatively stable.

“Some show concerns that Trump’s protectionism will hurt Korea’s IT sector, but there is no way it will have negative impacts since Silicon Valley’s IT industry is the one helping the U.S. economy grow right now,” said Kim Young-woo, an analyst at SK Securities. “Trump will never want to turn off the engine on the country’s leading IT sector.”

Given that American tech giants Apple and Google produce smartphones abroad, the Trump administration will have less incentive to impose hefty tariffs on phones and other IT devices. And even if the president-elect were to raise trade barriers, Korean players would not necessarily face a competitive disadvantage. “Apple is producing all the phones in China and Google’s Pixel is also produced in Taiwan,” Kim said. “There is no way that Samsung Electronics will be discriminated against when competing with them.”

Kim projected the IT industry would continue to grow as long as demand continues to rise. “Companies with creative ideas and technologies will lead the market in the near future as it did in the past,” Kim said. “Airbnb doesn’t own a single room and Uber can run its company with no cars. Only ideas and technologies will matter to the IT sector.”

Korean chip makers like SK Hynix could benefit from a Trump presidency wary of Chinese manufacturers. Such a policy stance will likely hamper the increasingly close relationship between Chinese and American semiconductor makers. “For local chip makers, the cooperation between Chinese and American manufacturers has posed a threat,” said Kim Kyung-min, an analyst at Daishin Securities. “But with Trump’s hostile stance toward China, the partnership between the two will diminish, with Micron hit especially hard by that.”

The president-elect’s push to ease regulations and open up federal land for drilling could have a positive impact on Korean energy and petrochemical companies. “Trump’s policy will gradually lead to an increase in oil prices,” said Song Young-joo, a researcher at Kyobo Securities. “A policy that is friendly to the oil industry will increase demand for drilling and oil refining, which can translate into opportunities for petrochemical players.”

Prospects for construction projects, though, remain tepid. Many are worried that if Trump makes moves to sanction Iran again, construction projects where Korean companies are contractors might be put on hold. “Trump repeatedly criticized a nuclear deal with Iran,” said Lee Seon-il, an analyst at Daishin Securities. “That will hurt the momentum of construction and infrastructure projects there. If Trump repeals the agreement, uncertainties will spread across the Middle East, a key market for Korean builders.”

Other analysts are more hopeful, citing Trump’s promise to spend big on infrastructure in the United States. “The big trend is that countries around the world will increase spending on infrastructure,” said Lee Kyung-ja, a researcher at Korea Investment & Securities. “Trump’s friendly approach toward Russia, which is different from that of his predecessors, will also enhance prospects for Korean construction companies operating in Russia.”

Hyundai Engineering & Construction and Hyundai Heavy Industries are among the builders currently working in Russia.

But absent clear economic policies from a Trump presidency, Kim of SK Securities suggested the Korean government take pre-emptive action against possible renegotiation of the free trade agreement between the two countries.

Trump has criticized the agreement with Korea as one of the poorest trade deals the U.S. government agreed to sign, arguing that it only benefited the Korean economy and heavily regulated foreign firms in Korea. Some American law firms have criticized regulations that impose restrictions on lawyers practicing in the country.

“It might be better for the Korean government to pre-emptively solve such problems in advance to avoid running into bigger trade problems,” Kim said.

The Korea Center for International Finance, in a report released Thursday, expressed concerns that Korea might be accused of currency manipulation and face punishment in the form of trade barriers.

“The possibility of significant tariffs on countries viewed as currency manipulators should be of great concern,” the center said. “This could well hit Korea directly with threats of action against Korean products unless the currency appreciates.

“It could also hit Korea indirectly with threats of action against Chinese products, especially since China has been experiencing capital flight.”

BY PARK EUN-JEE, KIM YOUNG-NAM [park.eunjee@joongang.co.kr]