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Vehicles for export are lined up at the Hyundai Motor Group’s Ulsan plant. (Hyundai Motor Group) |
South Korea logged an all-time high trade surplus with the United States in the first half of this year based on strong auto exports, as the country monitors the US presidential race carefully and the chances of a second Donald Trump administration’s heavy protectionism.
According to the Ministry of Trade, Industry and Energy and Korea International Trade Association on Sunday, Korea posted a record US trade surplus of $28.7 billion from January to June this year, up 55.1 percent from the same period last year. The US trade surplus exceeded Korea’s overall trade surplus of $23.1 billion in the first half of 2024.
Korea’s trade balance with the US has been in the black and on the rise in recent years, recording trade surpluses of $11.4 billion in 2019, $16.6 billion in 2020, $22.7 billion in 2021, $28 billion in 2022 and $44.4 billion in 2023. The US became the country with the largest trade surplus for Korea last year, overtaking China for the first time in about 20 years.
For Korea’s record trade surplus with the US in the first half of this year, the automotive sector was the leading factor, as it recorded $19 billion in exports to the US, up 28.9 percent on year. The semiconductor sector came second at $4.5 billion, followed by automotive parts with $4.1 billion, oil products with $2.7 billion, computers with $1.8 billion and batteries with $1.6 billion.
The growth in Korea’s US trade surplus is attributed to various factors, including the upgraded competitiveness of leading exports such as vehicles, the realignment of supply chains due to the trade war between the US and China and the Biden administration’s Inflation Reduction Act aimed at bolstering domestic supply chains and boosting clean energy.
Although Korea has enjoyed upbeat numbers in US exports, Trump’s "America First" policies pose a grim and murky outlook for Korean businesses, as the former US president has proposed a new 10 percent universal tariff on all imports. Trump’s camp pointed to vehicles and auto parts made in Korea, Japan, Europe, Mexico and Canada as factors for the US trade deficit.
According to the Korea Institute for International Economic Policy’s analysis, if Korea is slapped with 10 percent universal tariffs, Korea's exports to the US are forecast to decrease by approximately $15.2 billion, while exports to other countries are projected to decrease by about $7 billion due to indirect effects.
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Republican presidential candidate and former US president Donald Trump holds up a fist after speaking at a campaign rally in Grand Rapids, Michigan, Saturday. (AP-Yonhap) |
Trump pledged to bolster the theme of made-in-America for the auto industry in his presidential candidate nomination acceptance speech at the Republican National Convention in Milwaukee on Thursday.
“We have long been taken advantage of by other countries. And think of it, oftentimes these other countries are considered so-called allies. They’ve taken advantage of us for years,” he said without mentioning any names.
“The way they will sell their product in America is to build it in America, very simple. Build it in America and only in America. This very simple formula will create massive numbers of jobs. We will take over the auto industry again.”
Hyundai Motor Group, the world’s third-largest automaker, is bracing for the uncertainties of a second Trump administration, as the Korean auto conglomerate will look to cope with Trump’s anti-electric-vehicle stance.
Trump said he will “end the electric vehicle mandate on Day 1” to save the US auto industry from “complete obliteration,” vowing to scrap the Biden administration’s target of having 50 percent of all new car sales electric in 2030.
Hyundai Motor Group’s three brands — Hyundai Motor, Kia and Genesis — combined for over 37,000 EVs sold in the US in the second quarter of this year, making it the second-largest EV seller behind Tesla.
The Korean automaker will look to utilize Hyundai Motor Group Metaplant America, a new auto manufacturing site being built in Georgia, to add flexibility in terms of local production. Despite the initial plan to use HMGMA as an EV-only factory, the company later revised the strategy to assemble hybrid vehicles there. HMGMA is expected to begin operation in the fourth quarter of this year.
“(The possibility of a second Trump term) removing EV incentives and the slowing EV growth will temporarily drag down the usefulness of (HMGMA) under construction, but such a setback could be redeemed by expanding the proportion of local production as Trump replaces (the existing government subsidies) with ‘Buy American’ incentives,” said Song Sun-jae, an analyst at Hana Securities.
“(Hyundai Motor) has enough capability for short- to mid-term responses through mixed production (that can roll out both hybrid vehicles and EVs).”
