Korea’s exports are anticipated to see a significant increase following the landmark commerce cope with the US, as paperwork launched with the settlement supply a clearer outlook for U.S.-bound shipments in key industries, together with vehicles and semiconductors.
On Friday, Seoul and Washington launched the actual fact sheet summarizing the outcomes of the Oct. 29 summit between Korean President Lee Jae Myung and U.S. President Donald Trump. The 2 nations additionally signed a brand new memorandum of understanding, sealing the small print of their tariff negotiations since July.
Below the brand new settlement, the U.S. has agreed to decrease its tariffs on Korean vehicles and automotive elements from 25 p.c to fifteen p.c, utilized retroactively from Nov. 1.
The brand new tariff price successfully places Korean exporters on an equal footing with their counterparts from Japan and the European Union in one among its key industries.
The timing is essential, because the nation’s automotive business has been grappling with months of uncertainty over greater tariff charges. For the reason that earlier 25 p.c tariff was imposed in April, Korea’s vehicle exports to the U.S. fell 7.5 p.c in September from a yr earlier.
The tariff imposed on Korea’s two main carmakers drove third-quarter prices sharply greater, totaling round 1.8 trillion received ($1.25 billion) for Hyundai Motor and greater than 1.2 trillion received for Kia. This hit the 2 corporations’ third-quarter working income, which fell practically 30 p.c and 50 p.c year-on-year, respectively.
The brand new tariff price permits Korean automakers to compete once more with their Japanese and European rivals on a stage enjoying area.
Earlier than the second Trump administration, Korean carmakers loved obligation free entry to the U.S. market underneath the Korea-U.S. Free Commerce Settlement, giving them a 2.5 proportion level benefit over Japanese-made autos.
After the tariff saga, that benefit is now gone, however main Korean carmakers have been steadily increasing their U.S. manufacturing bases via continued funding, which is predicted to assist exports within the years forward.
The reassurances that Korean semiconductors will probably be handled “no much less favorably” than their opponents additionally increase expectations for exports sooner or later.
With world demand for reminiscence, storage and different chips peaking on the again of the bogus intelligence increase, Korean chipmakers have been breaking export information, posting year-on-year progress for eight straight months since March.
SK hynix’s HBM4 is displayed on the Semiconductor Exhibition in Seoul, Oct. 22. Yonhap
The semiconductor exports from January to October this yr have topped $140 billion, far exceeding the $129.2 billion file of 2022. In September alone, the business noticed $16.61 billion in exports, rising 22 p.c from a yr earlier and marking an all-time month-to-month file.
One of many principal uncertainties hanging over this so-called supercycle had been the potential for a U.S. tariff on chips, with Trump warning earlier this yr that the speed may go as excessive as one hundred pc. Whereas Washington has but to announce a particular determine, analysts say Korea is unlikely to be at a drawback so long as the tariff is about at a stage similar to that utilized to its largest competitor, Taiwan.
The newest tariff settlement is predicted so as to add momentum to Korea’s current export positive factors. In accordance with the Financial institution of Korea, the nation posted a $13.47 billion present account surplus in September, the second largest ever and the best determine recorded for any September.
From January to September, the cumulative surplus reached $82.77 billion, setting a brand new all-time excessive determine.
“The semiconductor increase has been the largest driver behind the present account surplus. Robust vehicle exports to numerous markets, sturdy transport gross sales and higher major revenue from abroad dividends have additionally performed main roles,” an official from the Financial institution of Korea defined.
