As Korea's economy braces for implications of Trump policies, U.S. investments offer leverage

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As Korea's economy braces for implications of Trump policies, U.S. investments offer leverage

Published: 11 Nov. 2024, 17:25

SHIN HA-NEE
shin.hanee@joongang.co.kr

Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok speaks during the seventh advisory meeting on international economic affairs held at the Export-Import Bank of Korea on Monday. [MINISTRY OF ECONOMY AND FINANCE]

Korea is bracing for the potential impacts of U.S. President-elect Donald Trump's bold policy proposals on its export-driven economy, as the incoming administration is expected to have a diverging range of implications across domestic sectors.

While Korea’s growing U.S. trade surplus may encourage the Trump administration to add further pressure, its robust investments in the United States can serve as leverage at the negotiation table, suggested experts.

The Ministry of Economy and Finance held an advisory meeting on economic affairs at the Export-Import Bank of Korea (Korea Eximbank) in western Seoul on Monday, chaired by Finance Minister Choi Sang-mok.

"We need to closely monitor the impact of the U.S. presidential election results on the Korean economy and devise an action plan for each sector based on detailed analyses," said Choi, who also doubles as the deputy prime minister for economic affairs.

“It is still difficult to predict the impact of the incoming U.S. administration’s policies, but they will certainly have varied implications not only on the external economic environment, such as trade, foreign policies, supply chains and the capital market, but also for every other aspect,” said Choi.

The finance minister has previously warned on Nov. 7, "If the policies that President-elect Trump has been emphasizing become a reality, they will significantly impact our economy."

Economic experts who attended the latest advisory meeting warned that the incoming administration is likely to lean toward “a U.S.-centered approach, marked by unilateral pressure or negotiations,” according to the ministry, urging relevant entities to “devise a diplomatic and strategic bargaining plan while also protecting our core interests.”

The meeting came after President Yoon Suk Yeol instructed Choi to spearhead the launch of a finance, trade and industry consultative body to prepare for the second Trump administration on Sunday.

"The two main industries we currently live off of are semiconductors and automobiles, but shipbuilding is now actively developing,” said Yoon, adding, “If the new U.S. administration adopts a more flexible policy toward fossil fuels, I think our somewhat stagnant petrochemical industry could recover."

President Yoon Suk Yeol convenes a meeting with senior government officials and presidential aides at the presidential office in Yongsan District, central Seoul on Sunday to discuss the economic and security implications of a second Trump administration. [JOINT PRESS CORPS]

Korea needs to leverage its growing investments in the United States as bargaining power before entering negotiations, suggested the Korea Institute for International Economic Policy (KIEP) in a recent report.

“Given the examples during the first Trump term, the second Trump administration is expected to make adjustments [in trade conditions] after implementing a universal tariff, while also leaving room for further negotiations,” wrote the state-run think tank.

“Korea needs to devise a rationale that the Trump administration can get on board with, and leverage its investment track record in the United States, which stands out relative to the rest of the world, to encourage a shift in stance,” the KIEP suggested.

Korea’s investments in the United States have been on a steady uptrend, from around $11 billion to $15 billion per year during the first Trump administration from 2017 to 2020, reaching $27.93 billion in 2021. The figure increased to $29.5 billion in 2022 and $28.04 billion last year, according to data compiled by Korea Eximbank.

The percentage of Korea's total foreign investments that went to the United States stood at 43 percent last year, a record high.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]