Unlock the White Home Watch publication without spending a dime
Your information to what the 2024 US election means for Washington and the world
South Korean firms concern that President Yoon Suk Yeol’s impeachment following a failed try to impose martial legislation this month has undermined efforts to foyer Donald Trump’s incoming administration to guard their exports and investments within the US.
The US president-elect has threatened to impose sweeping tariffs and assessment beneficiant subsidies for firms to spend money on the US, together with these for America’s allies and largest buying and selling companions.
However latest political turmoil in Seoul has left the marketing campaign to counter Trump’s commerce protectionism rudderless, in response to a number of folks concerned within the lobbying effort who described the South Korean authorities’s diplomatic efforts as “paralysed” and “absent” within the wake of Yoon’s aborted energy seize.
“There is no one from the government to represent the Korean interest just when we need it the most,” stated an individual representing a conglomerate that invested billions of {dollars} within the US throughout outgoing President Joe Biden’s time period.
“It is not possible for us to withdraw our investments now,” the individual added. “We are like in a hostage situation.”
Trump-related dangers for South Korea’s export-reliant economic system vary from across-the-board import tariffs to the attainable revocation of subsidies for Korean chip, battery and electric-vehicle makers promised by Biden. The Korean semiconductor business can also be uncovered to extra aggressive US export controls on China.
The specter of commerce disruption additionally comes at a time when Asia’s fourth-largest economic system is already wrestling with weak home demand, hovering personal borrowing and intensifying competitors from Chinese language exporters.
On Wednesday, South Korea’s overseas minister Cho Tae-yul acknowledged that the political turmoil had disrupted diplomatic efforts, including: “We are fully committed to regaining that momentum as quickly as possible.”
Yeo Han-koo, a former South Korean commerce minister now on the Peterson Institute for Worldwide Economics in Washington, stated that even earlier than the political disaster, “the feeling in Seoul could be described as anxiety bordering on panic”.
Korean policymakers and enterprise leaders had been “traumatised” by Trump’s first time period, stated Yeo, when the US president threatened to cancel a bilateral free commerce settlement and take away American army forces from the Korean peninsula except Seoul contributed extra to their maintenance.
A survey of 239 firms launched by the Korea Enterprises Federation this month discovered 82 per cent anticipated South Korea’s economic system can be harmed by Trump’s anticipated protectionist insurance policies.
However Yeo urged that some Korean fears had been “overblown”, arguing that “much has changed” since Trump was first elected in 2016. South Korea was the most important supply of overseas direct funding within the US final 12 months, with firms investing tens of billions of {dollars} in US manufacturing services for chips and inexperienced applied sciences.
“More than perhaps any other country, South Korea can argue it is contributing to a revival in US manufacturing, and that it deserves a place within the walls of Fortress USA,” Yeo stated.
South Korea’s commerce surplus with the US was $28.7bn within the first half of 2024, in response to the Korea Worldwide Commerce Organisation, and is about to overhaul final 12 months’s report of $44.4bn, elevating issues that Trump, who’s delicate to US commerce deficits, may goal the nation once more.
Nonetheless, an govt from certainly one of South Korea’s main business associations stated that latest conversations with folks anticipated to serve in Trump’s administration urged that current investments would do little to sway the incoming president and his internal circle.
“We tried to appeal to them by stressing the fact that Korea was the biggest foreign investor and created lots of jobs,” the chief stated. “But we were told that it doesn’t matter for Trump as he is more interested in what the Korean companies will do from now on. He doesn’t want to hear what they did during the Biden administration.”
One other individual conversant in the Korean lobbying effort stated one “specific concern” was the return of Peter Navarro, Trump’s former commerce envoy, as a senior financial adviser.
Trump this month praised Navarro, who beforehand accused Korean conglomerates Samsung and LG of “trade cheating” by relocating manufacturing to keep away from antidumping measures, for serving to renegotiate “unfair Trade Deals like Nafta and the Korea-US Free Trade Agreement”.
Analysts stated Korean firms had been unlikely to keep up their scale of funding given the challenges they had been already dealing with, starting from excessive prices of development, labour and childcare to a scarcity of expert labour, difficulties securing visas and dependable energy provide. A weak South Korean gained and lagging demand for EVs had been additionally dampening enthusiasm.
Lee Tae-kyu, senior fellow on the Korea Financial Analysis Institute (KERI), stated South Korea’s economic system may obtain a modest increase if Trump’s tariffs targeted narrowly on Chinese language exports, pointing to shipbuilding, defence and petrochemicals as areas the place Korean firms stood to profit.
Seoul may additionally scale back its commerce surplus by shopping for extra American arms and fossil fuels, Lee added.
However Korean battery and EV makers may face a nightmare state of affairs if Trump had been to succeed in a grand discount with Beijing on commerce that allowed Chinese language rivals to arrange their very own vegetation within the US — one thing the incoming president has stated he would take into account.
“If Chinese companies are allowed to build plants in the US, that will be a disaster for us,” stated a Korean battery business govt. “But even our government officials don’t seem to know who to talk to in Washington to deliver our concerns.”
