High Tariffs in the United States and Korean Industries: Analysis of Impact and Response Strategies for Automobiles, Steel, and Semiconductors

The Revival of Protectionism, South Korea at the Forefront

In 2025, the United States is once again strengthening protectionism. Following President Trump's re-election, the U.S. government has revived high tariff policies focusing on strategic industries. South Korean semiconductors are subject to a 10% tariff, while automobiles, steel, and aluminum face tariffs of up to 50%, leading to a short-term shock across South Korea's export industries. Considering the impact of the past U.S.-China trade war on global supply chains, this measure will pose a more direct and structural challenge to South Korea, which has close economic ties with the U.S. As all three major export sectors—automobiles, semiconductors, and steel—are subject to tariff measures, South Korea perceives this not merely as a trade dispute but as a signal of a shift in the economic paradigm. In response, the government and businesses are engaging in diplomatic negotiations and adjusting industrial strategies, with these efforts poised to play a critical role in determining the medium- to long-term structure of the South Korean economy.

Impact Analysis by Industry

(1) Automotive: A Double-Edged Sword of Expanding Local Production The industry most directly affected is automotive. Since March, the U.S. has imposed a 25% high tariff on Korean-made finished cars and parts, which has caused Hyundai and Kia to lose price competitiveness in the U.S. market. The Bank of Korea forecasts that due to the tariff increase, Korea's automotive exports could decrease by up to 4% annually. In response, Hyundai Motor Group has decided to expand production at its factories in Alabama and Georgia and is considering local production transitions for some electric vehicle models. While increasing production in the U.S. offers a short-term advantage of tariff evasion, it also comes with the adverse effects of reduced domestic jobs and narrowed production lines. Additionally, the increased fixed cost burden from rising investments in the U.S. may lead to a decline in profitability in the future. (2) Steel and Aluminum: The Frontline of Trade Retaliation The steel and aluminum sectors are the primary targets of the recent tariff measures. Following the 25% tariff imposed in March, the U.S. has increased it up to 50% on certain products starting in June. Major Korean steel companies like POSCO and Hyundai Steel are facing reduced export volumes and fluctuations in raw material prices, with the industry expecting a more than 12% decline in exports to the U.S. Particularly, the U.S. actions backed by the justification of “national security” under Section 232 make it difficult for the Korean government to respond effectively to potential WTO disputes. As a result, the Ministry of Trade, Industry, and Energy has formed a "Korea-U.S. Trade Negotiation Response Task Force" focused on the steel and automotive industries, and is working on establishing a negotiation roadmap that reflects companies' opinions. (3) Semiconductors: Some Buffer, but Underlying Uncertainty The semiconductor industry has a relatively low tariff of 10%, and the Bank of Korea has analyzed that the export decline will be limited to around 0.2%. This is due to the surge in demand for D-RAM and HBM for AI and high-performance servers, leading to an influx of advance orders. Samsung Electronics and SK Hynix are partially offsetting the impact based on long-term supply contracts with major tech companies in the U.S. However, in the medium to long term, the potential for technology control and supply chain disruptions may pressure the industry. Especially as the U.S. has initiated Section 232 investigations on semiconductor equipment and materials, there are concerns that the entire advanced technology ecosystem could fall under control in the future. Samsung is responding by investing in its Taylor factory in the U.S. and expanding R&D, but this indicates that the entire industry environment has become more sensitive to "political risk."

Korea-US Trade Negotiations: The Intersection of Strategic Negotiation and Diplomacy

The South Korean government launched a 'Task Force for U.S. Trade Negotiations' on June 16, led by the Ministry of Trade, Industry and Energy, in response to the ongoing trade crisis. This organization focuses on three main strategies: tariff exemptions, reduction of non-tariff barriers, and resolution of trade imbalances. The task force is formulating strategies through close cooperation with the industrial sector and is using the deadline for tariff exemptions set for July 8 as a turning point. President Lee Jae-myung is also directly involved in the tariff issues. He has promised swift government response through meetings with representatives of major companies such as Samsung, Hyundai Motor, and SK, and has indicated that he will promote the resumption of negotiations and the reestablishment of trade order between the two countries through his first phone call with President Trump. The U.S. side is also showing a flexible attitude, with President Trump hinting at the possibility of extending the July 8 deadline. The key to the negotiations lies not just in tariff exemptions, but in how to coordinate a wide range of non-tariff issues that the U.S. is demanding, such as digital trade, access to agricultural markets, and stability in monetary policy. In response, South Korea is countering with a strategic industrial cooperation package involving shipbuilding, energy, and defense industries, and is leveraging the expansion of imports of U.S. energy and grains as part of its strategy.

Conclusion - A Turning Point that Facilitates Structural Change

The high tariffs in the United States in 2025 are causing a shock to Korea's export industry in the short term, but this has made it more apparent that there is a need to enhance industrial structure and reassess trade strategies. The automobile industry is working on expanding production in the U.S. while also restructuring domestic production lines, and the steel industry faces the challenge of upgrading products and diversifying export markets. The semiconductor sector has demonstrated short-term resilience, but it is grappling with the tasks of technological self-reliance and stabilizing global supply chains. Most importantly, it is crucial for the Korean government to strengthen its trade diplomatic capabilities in light of this situation and to institutionalize collaboration with the industrial sector. This crisis serves not only as a shock from external factors but also as a test of the sustainability of the Korean economy. In a renewed era of protectionism in the international order, Korea is being called upon to demand new economic strategies and diplomatic sophistication.