Home > Business > Economy

Korean companies struggle with Trump's trade policy

Published: 27 Apr. 2025, 14:02

U.S. President Donald Trump speaks to media after signing executive orders related to higher education, alongside U.S. Commerce Secretary Howard Lutnick, left, and Education Secretary Linda McMahon in the Oval Office of the White House in Washington on April 23. [AFP/YONHAP]

In his first 100 days in office, U.S. President Donald Trump has issued a wave of executive orders and tariffs aimed at reducing his country's trade deficit and boosting domestic manufacturing. But the rapid and unpredictable changes in his policies have left Korean companies hesitant to make critical decisions on overseas projects and investments.

Trump's shifting policies, such as country-specific reciprocal tariffs of up to 50 percent and a 90-day implementation pause, have injected significant uncertainty into global markets.

Many Korean firms, heavily reliant on U.S. exports, are now grappling with how to adapt in an increasingly volatile trade environment.

Trump, who started his second term on Jan. 20, initially threatened 25 percent tariffs on all imports from Mexico and Canada, which have tariff-free access to the United States under the U.S.-Mexico-Canada Agreement, but later lifted the duties.

In April, Trump announced his long-promised reciprocal tariffs on goods from countries that run trade surpluses with the United States, along with a 10 percent baseline duty on imports from all countries. Korean products were subject to a 25 percent reciprocal tariff.

Certain sectors, including cars, semiconductors and pharmaceuticals, were exempted from the reciprocal tariff, but are subject to sectoral duties already in place or set to be introduced.

For many Korean exporters, the lack of consistency in trade policy of the world's largest economy has created major strategic challenges.

To mitigate potential fallout, several firms have already explored relocating production or scaling back output.

Yet experts warn that such responses have limitations. The uncertainty around future policy changes, they say, makes long-term planning difficult and expensive.

“Companies will seek ways to reduce costs by relocating production facilities or adjusting shipments to the U.S.,” said Cho Seong-dae, head of the trade policy research office at the Korea International Trade Association (KITA).

“But since it's nearly impossible to predict U.S. trade policy, many decisions are effectively on hold. Everyone is waiting to see what Trump will say next.”

When the White House threatened tariffs on Mexican imports, Korean companies with manufacturing bases in Mexico, including Kia, Samsung Electronics and LG Electronics, had announced plans to move their Mexican production to the United States or increase output elsewhere.

Those plans were later shelved after tariffs on Mexico were waived and the country was excluded from reciprocal tariffs.

Hyundai Motor Group, Korea's largest automaker, recently announced a plan to invest $21 billion in the United States over the next three years in an effort to ramp up U.S. production.

Despite the move, the company could not completely avoid the sectoral tariffs on imported vehicles.

Hyundai Motor and Kia sold a combined 1.7 million vehicles in the United States last year, including 1 million cars manufactured in Korea.

Hyundai Motor Group Executive Chair Euisun Chung, center, speaks during the opening ceremony for Hyundai Motor Group Metaplant America in Ellabell, Georgia, on March 26. [EPA/YONHAP]

Meanwhile, Seoul and Washington began new trade negotiations last week, with Korea seeking exemptions from both reciprocal and sector-specific tariffs. Korea proposed a comprehensive “package deal” addressing multiple sectors to secure more favorable terms.

Amid the ongoing talks, many Korean companies have adopted a cautious, wait-and-see stance, even as they develop contingency strategies.

“We have been studying broader strategies since the beginning, but not much has changed [since Trump took office],” said an official from a Seoul-based company who requested anonymity. “If the U.S. announces detailed tariffs, then we can flesh out our plans more precisely.”

Samsung Electronics, whose businesses span semiconductors, home appliances and smartphones, has expressed confidence in navigating the shifting trade landscape thanks to its extensive global production network.

“The impact of the new reciprocal tariffs is slim, but we are monitoring the situation closely as U.S. trade policies continue to evolve,” Yong Seok-woo, president and head of the visual display business at Samsung Electronics, said in a news conference earlier this month. “With 10 production bases globally, we plan to overcome these challenges through strategic production allocation.”

In the semiconductor sector, where Trump has hinted at a new round of tariffs, Korean chipmakers remain cautious.

“We can't do much at this point,” said an official from a major Korean chipmaker. “We need to wait for Trump's next announcement before discussing our strategy.”

Finance Minister and Deputy Prime Minister Choi Sang-mok, second from left, Minister of Trade, Industry and Energy Ahn Duk-geun, left, U.S. Treasury Secretary Scott Bessent, second from right, and U.S. Trade Rep. Jamieson Greer pose for a photo prior to their trade talks in Washington on April 24. [NEWS1]

Concerns are also growing around investments already committed under the U.S. CHIPS Act.

Samsung Electronics signed a deal last year to receive a $4.7 billion subsidy from the U.S. Department of Commerce for its $37 billion investment in Texas while SK hynix is set to receive $458 million in subsidies for its investment in Indiana.

Trump has expressed skepticism about offering such subsidies, adding more uncertainty to these deals.

Experts warn that while many companies have front-loaded exports and inventory to the United States ahead of the tariffs, the real impact will begin in the second quarter.

“Once they sell off their current inventory and need to replenish supplies, that is when the tariffs will start to bite,” said Cho from KITA. “Now is the time for companies to brace for the shock and develop more practical, long-term solutions.”

Yonhap