South Korean firms struggle with uncertainties from Trump's trade policy

Seoul, April 27 (IANS) In his first 100 days in office, US 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 South 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, reports Yonhap news agency.

Many South 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 (USMCA), 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. South 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 South 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, South Korean companies with manufacturing bases in Mexico, including Kia Corp., Samsung Electronics Co. and LG Electronics Inc., had announced plans to move their Mexican production to the U.S. 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, South Korea's largest automaker recently announced a plan to invest US$21 billion in the U.S. over the next three years in an effort to ramp up American production.

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

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

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

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

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 press 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, South 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."

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

—IANS

na/