"US Tariff Policy, Major Impact on Korean Automobiles"

Korea Economic Daily

Summary

According to the Bank of Korea analysis, the US tariff policy is expected to reduce the Korean automobile industry's GDP exports by 0.6% and US exports by 4%.
The report states that if automobile production in the US expands to avoid tariffs, long-term export declines could worsen.
The steel and aluminum industries are also expected to see annual decreases of 0.3% in GDP exports and 1.4% in US exports due to tariff impacts.

Bank of Korea 'Impact of US Tariff Policy on Export by Item' Report

An analysis suggests that if the US government's tariff policy continues, the automobile industry will be the most affected among domestic industries.

According to the 'Impact of US Tariff Policy on Export by Item' report published by the Bank of Korea on the 29th, the automobile industry is expected to see a 0.6% decrease in GDP goods exports and a 4% decrease in exports to the US (volume).

The US tariff rate is assumed to remain at the current deferred level. A basic tariff of 10% is applied to all countries except China, Canada, and Mexico, and tariffs on steel, aluminum, automobiles, and parts remain at 25%. Semiconductor tariffs are set to be imposed at 10% in the second half of the year with no further changes.

The significant impact on automobiles is due to the high proportion of exports to the US, which was 46% last year, and the minimal presence of Chinese automobiles in the US, making it difficult to expect any offsetting benefits.

The report states, "The impact of price increases on exports following the imposition of tariffs in early April has not yet fully manifested and will become more apparent in the future," adding, "If automobile production in the US expands further to avoid tariffs, exports may decrease even more in the long term."

The steel and aluminum industries are expected to see annual decreases of 0.3% in GDP goods exports and 1.4% in exports to the US (volume) under the same scenario. Like automobiles, metals have a large share in the US market and the tariff rate itself is high at 25%.

The report notes, "Although tariffs were imposed in March, the effects have not been visibly apparent due to a 3-4 month contract and shipment lag," predicting that "the negative impact will increase from the third quarter when existing contract periods end."

Additionally, the Bank of Korea warns, "US tariffs will reduce short-term exports of automobiles and steel and have long-term impacts due to production shifts to the US," adding, "In the case of automobiles, the impact on the Korean economy and employment will be amplified due to the many small and medium-sized suppliers in the supply chain."

Lee Song-ryeol, Hankyung.com Reporter yisr0203@hankyung.com