Korea's export situation, without considering semiconductors, appears dismal
In the bustling ports of Pyeongtaek, Gyeonggi, containers ready for export stand tall, a testament to the economic ties between South Korea and the United States. However, the expansion of US tariffs on South Korean exports, effective from April 2, 2025, has brought about a significant impact, particularly on specific sectors.
The tariffs, imposed at a reciprocal rate of 25%, targeted a broad range of exports, including autos, steel, and aluminum. This move led to sharp declines in tariff-affected sectors such as automobiles and steel. However, sectors exempted from these tariffs, notably semiconductors and pharmaceuticals, saw strong growth in the first half of 2025.
The auto industry, initially facing a 25% tariff, experienced a sharp decline in exports, prompting emergency support measures by South Korea’s government. The reduction of the tariff to 15% after negotiations helped mitigate further damage but the sector remains affected by the elevated tariff level compared to previous free trade terms.
Home appliances and K-beauty (cosmetics) sectors, while not explicitly highlighted in the search results for tariff impact, may have faced limited new tariffs or been less impacted compared to autos and steel. The US-Korea Free Trade Agreement previously mandated zero tariffs on most manufactured goods, which likely benefited home appliances. K-beauty products may not be majorly tariff-targeted under this initiative, though trade disruptions could indirectly affect their market.
Semiconductors, a critical industry for South Korea, were not subject to the new tariffs. The US guaranteed that South Korea would not be treated worse than other countries like Japan in applying tariffs on semiconductors, maintaining a lower or no-tariff status on these goods.
Steel, aluminum, and copper, on the other hand, faced high tariff rates (up to 50%), which remained in place even after negotiations, continuing to pressure these export sectors.
Overall, the expanded US tariffs in 2025 resulted in a significant challenge for Korea's export sectors directly targeted by the tariffs (autos, steel, and metals). Meanwhile, high-tech sectors like semiconductors and pharmaceuticals were mostly spared and demonstrated strong growth. The home appliances and K-beauty sectors were either less affected or not specifically targeted by these tariffs but may face indirect challenges from the broader trade tensions and export volume declines to the US.
Despite these challenges, South Korea's exports grew 5.9 percent on-year in July, according to data. The Minister of Science and ICT, Bae Kyung-hoon, toured a semiconductor research facility at Seoul National University on Aug. 13, underscoring the country's focus on this critical industry.
However, the first 10 days of August saw a decrease of 4.3% in South Korea's exports due to US tariff measures, highlighting the ongoing impact of these trade policies. Visitors at the National Science Museum in Gwacheon, Gyeonggi, looked on at explanations about the graphics processing unit (GPU) and high-bandwidth memory (HBM) structures, a testament to South Korea's continued commitment to innovation and growth in the face of these challenges.
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