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A man watches President Yoon Suk Yeol's televised address and press conference marking the second half of his term while a television screen in the front displaying results of the US presidential election at an electronics market in Yongsan, Seoul, Thursday. (Yonhap) |
The export-reliant Korean economy is bracing for Donald Trump’s return to the White House, with the energy and high-tech sectors here expected to bear the brunt of the US policy shift centered on his trade protectionism and the rollback of Joe Biden's green energy push.
Korea’s Finance Minister Choi Sang-mok said on Thursday he expected considerable changes in external economic conditions in the wake of President-elect Donald Trump's victory over Vice President Kamala Harris in Tuesday’s election.
“Should the policy stance emphasized by US President-elect Trump become a reality, it is expected to have a significant impact on the Korean economy,” he said during an economy-related ministers' meeting.
The government will reinforce consultations between ministries to minimize potential repercussions on the financial, trade and industrial sectors preemptively and thoroughly.
With Trump signaling to slap tariffs on competitors and allies alike in his second term, Asia's fourth-largest economy needs to prevent the US from raising trade barriers by leveraging Korean companies’ growing direct investment in the country, experts suggested.
“Given that Korea recorded a trade surplus with the US of $44.4 billion last year and $28.7 billion in the first half of this year alone, there is a high possibility that the new US administration will attempt to renegotiate existing trade deals such as the Korea-US Free Trade Agreement,” said Heo Yoon, an international studies professor at Sogang University.
Trump's possible reduction of government subsidies for high-tech industries, especially the chips sector, and his policy to put American companies’ interests first will likely deepen uncertainties for Korean firms.
“The second Trump administration is likely to strengthen the guardrail provisions of the CHIPS and Science Act and the investment requirements for allies to receive subsidies to pressure China and expand the inflow of foreign investment,” said Kwon Seok-joon, a professor of chemical engineering at Sungkyunkwan University.
He also asserted that semiconductor companies in Korea, Taiwan, Japan and Europe may face penalties if they do not invest capital on US soil.
Korea’s solar energy and battery firms are expected to encounter heightened uncertainty as Trump is poised to shake up the global energy market by overturning climate policies that US President Biden has pushed.
It is unlikely for Trump’s second administration to scrap Biden's Inflation Reduction Act, which aimed to boost renewable energy. But benefits for green companies such as clean energy investment tax credits could be scaled down and dampen Korean renewable energy companies’ business prospects.
Major Korean business organizations vowed to play a role in bringing the two economies closer to ride out global economic challenges.
The Korea Chamber of Commerce and Industry underscored that Korea and the US have shared a close economic partnership based on the ironclad security alliance that has been built over 70 years.
“President Donald Trump's firm and decisive leadership will accelerate the US economic recovery and contribute to the continued prosperity of the global economy,” said SK Group Chairman Chey Tae-won, who doubles as head of the KCCI.
The lobby group said that Korean companies in the automobile, semiconductor and battery industries have been making aggressive investments in the US, contributing to job creation and the manufacturing sector in the country.
“We will continue to work on creating opportunities for cooperation between the two countries and strengthen the long-standing partnership with the second Trump administration.”
Trump's second presidency offers a promising opportunity to reenergize the US-Korea partnership and explore new avenues for collaboration, the American Chamber of Commerce in Korea said.
"His focus on advancing global peace and prosperity, coupled with a strong commitment to strategic partnerships with allies, will be crucial as we navigate the challenges and opportunities in key sectors such as semiconductors, digital economy, health care and carbon-free energy," said James Kim, chairman and CEO of AmCham.
