Home > Opinion > Columns

Prepared for a bumpy ride ahead?

Published: 01 Dec. 2024, 19:53

Lee Sang-jae
The author is a deputy director of economy and industry news at the JoongAng Ilbo.

Headwinds are building up on the export front responsible for driving the Korean economy as the second Donald Trump presidency is poised to upend the free-trade order. Trump has warned of firing tariff salvos at allies and adversaries alike — 25 percent on imports of all goods from Mexico and Canada and an additional 10 percent duty on Chinese imports already subject to levies of about 15 percent — as soon as he returns to the Oval Office in January after a four-year hiatus.

The tariff regime does not impact just the two border countries but also applies to Korean manufacturers who have rushed into Mexico to capitalize on the U.S.-Mexico-Canada Agreement for tariff-free access to the United States. The Korea International Trade Association estimates Korea’s export growth rate will stop at 1.8 percent next year owing to the tariffs in its major market.

The protectionist trade environment coupled with hardline immigration policy under Trump 2.0 is expected to renew a run in the inflation and dampen the growth in the U.S. economy. In a recent interview with the JoongAng Ilbo, veteran U.S. investor Jim Rogers said he was “convinced” of a hard landing in the U.S. economy no matter who became the U.S. president or treasury secretary, as a result of a renewed spike in commodity prices and inflation.

The sluggishness of domestic demand in Korea is represented by 1-million self-employed going out of business. A slowdown in exports means a double whammy. Delivering a back-to-back rate cut last Thursday, the Bank of Korea downgraded next year’s growth estimate to 1.9 percent — below the country’s growth potential — from earlier 2.1 percent. Global investment banks like Goldman Sachs, JPMorgan, HSBC, and Nomura Securities also place Korea’s growth estimates at 1.7 percent to 1.9 percent for next year.

The annual year-end reshuffle at top-tier companies implies risk management as top business priority for the perilous year ahead. To ensure steady hands on the steer, veteran captains were sustained and called back onboard to respond to the Trump factors, drawing some criticism over the reliance on safer old-boy maneuvering.

Samsung Electronics has made Jun Young-hyun, the head of the semiconductor business, the co-CEO to give him direct control over the memory business that turned laggard due to the company’s slow transition to high-bandwidth memory. Of 400 executive-level titles in the chip sector, just one fourth were reshuffled.

Hyundai Motor Group chose a foreign CEO to command the automaking conglomerate in a new business environment. Jose Munoz, a Spanish-born American, will primarily deal with the changes in U.S. operations under Trump 2.0 which vowed to get rid of EV tax credit programs and subsidies for foreign carmakers.

Some did choose a younger breed. LG Group promoted four members of Gen M, born in the 1980s, to the executive level after elevating five in the age group last year. Forty-something executives now number 17 in the group, tripling in recent five years. SK is poised to keep discovering younger talents for business rebalancing. CJ announced 12 executives in their 40s and one CEO in his 30s. Gen Mers joining the C-suite of the country’s 100 largest companies topped 100 in 2022 for the first time and have been growing at a double-digit rate, according to executive matching platform Unico Search.

Fourth-generation heirs and 30-something CEOs represent younger leadership in the fast-changing age. They are mostly well versed in new-growth areas of artificial intelligence, robotics and second batteries. They would have earned their way up the ladder.

Moving up to the executive floor is as difficult as joining the top military brass. The younger C-suite must be daring in new ventures and manifest “animal spirits” touted by famous British economist John Maynard Keynes.

They must bet on dynamism with foresight instead of chasing immediate returns. Elon Musk, the tech billionaire behind Tesla and SpaceX poised to add administrative power with his friendship with president-elect Trump, is hosting an international contest on carbon-removing technology, with the top $50 million prize to be handed out in 2025 for any team that can prove its technique of soaking up CO2 at a scale of at least 1,000 tons a year. There are no method restrictions. Such radical missions are necessary to find breakthroughs for new growths.

Younger CEOs less beholden to corporate roots may be tempted to do away with less lucrative businesses as their management style may differ from their elder precedents. They must prove their ability through persuasion and connections. The young seated at the driver’s seat in a slow-motion economy must brace for a bumpy ride ahead.

Translation by the Korea JoongAng Daily staff.