Korea spared export hit after U.S.-China trade truce

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Korea spared export hit after U.S.-China trade truce

Published: 13 May. 2025, 19:30

SARAH CHEA
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Audio report: written by reporters, read by AI

U.S. President Donald Trump and Chinese President Xi Jinping [AP/YONHAP]

Washington and Beijing’s tentative truce in the full-blown tariff war offered breathing room for Korean companies, as big players like Samsung Electronics and LG Electronics use China as an intermediate manufacturing base for assembling parts.

A drop in Chinese finished goods exports to the United States could deal a heavy blow to Korean producers of intermediate goods, which made up almost 90 percent of total exports to China, Korea's current top export destination.

U.S. Trade Representative Jamieson Greer on Monday said the United States agreed to drop the 145 percent tariffs against China to 30 percent, while China compromised with a reduction in its tariff rate on U.S. goods to 10 percent from 125 percent. Twenty-four percent of the tariffs of each country will be paused for 90 days for further negotiations.

미중 관세

Intermediate goods, which refer to components, materials and parts used in the production of finished products, accounted for 85.8 percent of total exports to China as of last year, according to the Korea International Trade Association. Of that, more than 90 percent consisted of semiconductors and display-related components.

“The reconciliation between the two countries can be an encouraging sign for us at the moment, considering Korea’s trade structure with China, where its large surplus comes from the export of intermediate goods to China, which are then used to manufacture finished products,” said economics professor Woo Seok-jin of Myongji University.

“If the 145 percent tariff had remained in place, China’s exports to the U.S. would likely have plummeted sharply, and that impact would have directly affected Korea’s economy.”

Korea's big companies even manufacture some finished electronics in China to export them to the U.S. market, though much of that manufacturing capacity has already shifted to Vietnam. Samsung Electronics produces various electronics like washing machines, air conditioners and refrigerators in China, and approximately 22 percent of the company’s total smartphone shipments last year were produced by outsourced manufacturers based in China.

LG Electronics also manufactures air conditioners, microwave ovens and washing machines in its Chinese plants.

"Discussions appear to be unfolding with more room for compromise and negotiation than initially expected, which offers a somewhat optimistic outlook, as such developments can serve as a barometer for industries," said a source in the electronics industry. "But big companies like Samsung, LG and Hyundai have already taken measures in anticipation of such scenarios and moved their capacities to Southeast Asian countries."

The monthslong trade dispute between the United States and China has already disrupted Korea’s export landscape, with shipments posting a sharp decline. The two countries are Korea's biggest export destinations, amounting to 38 percent of total outbound shipments.

Korea’s exports to the United States plunged 30.4 percent during the first 10 days of May compared to the same period of last year, while exports to China slid 20.1 percent, according to data from the Korea Customs Service.

Shipments of automobiles, which were hit with tariffs of 25 percent by U.S. President Donald Trump since March, dipped 23.2 percent, or $1.12 billion, while oil products fell by 36.2 percent. Semiconductors were the only category to see growth — at 14 percent — among the nation’s top 10 export items, perhaps due to yet-to-be-announced sectoral tariffs on chips.

But experts still warn that Seoul should remain vigilant with the two countries’ apparent thaw in ties, as Trump could attempt to offset concessions for Beijing by demanding further trade gains from Korea.

“It couldn’t be an easy decision for Trump to impose higher tariffs on Korea, an ally, than on China,” Professor Woo said.

“But Trump will for sure try to compensate for backing down in the trade war with China by extracting more favorable terms from other countries like Korea and Japan, and in that context, Korea remains one of the most vulnerable countries, especially given ongoing issues surrounding the U.S. military support and defense cost-sharing negotiations.”

BY SARAH CHEA [[email protected]]