Supporters react as Fox Information initiatives Republican presidential nominee and former U.S. President Donald Trump as winner throughout the 2024 U.S. presidential election, in Palm Seaside County Conference Middle, in West Palm Seaside, Fla., Wednesday (native time). Reuters-Yonhap
Tariffs, laws to weigh closely on companies doing enterprise with US
By Nam Hyun-woo
On Oct. 28, shares of the world’s largest semiconductor foundry, TSMC, closed down 4.3 % following then-presidential candidate Donald Trump’s pledge to implement tariffs on chips from Taiwan as a substitute of offering subsidies to the corporate.
Hours later, this additionally impacted Korea’s SK hynix, whose shares closed down 2.91 %. The chipmaker had been experiencing a stable rally after reporting sturdy earnings for the third quarter of this yr, however its momentum was halted resulting from considerations over potential tariffs.
Specialists say this can doubtless be the case for a lot of Korean companies over the following 4 years. President-elect Trump’s strategic decoupling from Beijing presents a possibility for Korean chipmakers, carmakers, and different export-oriented companies to seize market share from China. Nonetheless, his plans to leverage financial strain in commerce negotiations are anticipated to position important burdens on companion international locations, together with Seoul.
“Trump suggests the implementation of a baseline tariff of 10 % on imports to the U.S, and warns of imposing a a lot stricter tariff of 60 % on all Chinese language items,” mentioned Jang Sang-sik, head of commerce development evaluation on the Korea Worldwide Commerce Affiliation (KITA).
A normal view of the Samsung Austin Semiconductor plant in Taylor, Texas, April 16. The U.S. has awarded Samsung $6.4 billion to assist the corporate’s chip manufacturing plant in Taylor in an effort to assist additional generate home manufacturing of semiconductors, alongside increasing Samsung’s manufacturing crops. AFP-Yonhap
Alternatives and challenges for chipmakers
For Korean chipmakers, Trump’s second presidency brings appreciable uncertainty, given his stance on the CHIPS Act and his strategic decoupling from China.
In keeping with a report by the Korea Institute for Industrial Economics & Commerce (KIET), Korean chipmakers can anticipate advantages in a second Trump administration, as Chinese language opponents in key semiconductor and demand industries — equivalent to smartphones and different IT gadgets — are more likely to encounter stricter regulatory scrutiny.
“The CHIPS Act, which was designed by the (first) Trump administration, performed a key function in slowing the progress of China’s semiconductor trade and curbing the rise of main Chinese language tech companies, successfully safeguarding the market share of main chipmakers,” the report mentioned. “Though there are uncertainties surrounding incentives coming from the CHIPS Act, Korean firms can anticipate advantages as a result of decline of Chinese language gamers.”
In 2019, Chinese language smartphone maker Huawei delivered 241 million smartphones, however that quantity plummeted to 4.3 million in 2021 after Trump signed an govt order to dam Chinese language telecommunications firms and then-Secretary of Commerce Wilbur Ross positioned Huawei on a blacklist in Might 2019.
Then-U.S. President Donald Trump excursions an Apple manufacturing plant in Austin with Apple CEO Tim Prepare dinner, Nov. 20, 2019. AP-Yonhap
Specialists additionally famous that Trump’s latest assaults on the CHIPS Act and threats to impose tariffs are seen as election rhetoric, and the probability of the president-elect really implementing tariffs on the expense of elevated prices for U.S. system makers is slim.
“Trump’s present coverage guarantees concerning semiconductors will doubtless be adjusted,” mentioned Professor Lee Jong-hwan at Sangmyung College’s Division of System Semiconductor Engineering. “If blanket tariffs are imposed recklessly, U.S. system makers will inevitably really feel the affect as effectively. If this turns into extreme, there’s all the time an choice of passing over the elevated value to the U.S. market, provided that the most important producers in each reminiscence and non-memory sectors are situated exterior the U.S.”
KITA’s Jang additionally identified that imposing duties on chips would necessitate Washington’s annulment of each the Korea-U.S. free commerce settlement and the Info Know-how Settlement, which guarantee tariff-free commerce for sure semiconductor-related objects.
“Trump tends to make use of an anchoring impact in negotiations: if he desires to get 50, he’ll begin by asking for 100,” Jang mentioned. “If the ultimate deal lands at round 50, the opposite social gathering seems like they’re getting a break, as if the president-elect has gone straightforward on them. Whereas it may not be easy to impose tariffs straight on semiconductors, he may make use of measures equivalent to lowering subsidies for Samsung Electronics or TSMC or limiting funding incentives.”
Development is underway for Hyundai Motor’s electrical vehicle-only manufacturing facility in Georgia on this photograph launched by the state authorities of Georgia, Feb. 26. Yonhap
Setbacks on EV technique, battery
The auto and battery industries anticipate important coverage shifts beneath Trump’s second time period, particularly given his menace to impose tariffs of as much as 200 % on autos imported from Mexico, with potential extensions to different imported autos.
Hyundai Motor and Kia have been addressing U.S. funding expectations by their manufacturing crops in Alabama and Georgia. Nonetheless, a considerable share of their U.S.-sold autos remains to be imported from Korea. If excessive tariffs are imposed, they might face strain to lift automobile costs, doubtlessly impacting their value competitiveness.
The KIET report famous that “dangers are excessive for hefty tariffs on cars” and emphasised the necessity for “diplomatic efforts for Korea to align with different car-producing nations to withstand these measures.”
One other concern for carmakers is Trump’s pessimism towards eco-friendly autos, doubtless resulting in important cuts in incentives presently supplied to eco-friendly automobile and battery producers.
Following the enactment of the Inflation Discount Act (IRA), which gives incentives for U.S.-manufactured electrical automobile (EV) purchases, Korean carmakers and battery producers have ramped up their EV-related investments within the U.S.
Nonetheless, Trump has voiced plans to revoke IRA incentives, along with his working mate, J.D. Vance, introducing a proposal to redirect EV credit towards gas-powered autos. Whereas it’s unlikely that Trump will totally remove the IRA, analysts counsel he might cut back EV credit score quantities by govt orders.
This shift means that inner combustion engine (ICE) and hybrid autos may more and more substitute EVs out there. Consequently, carmakers might must reallocate or repurpose investments in EV manufacturing amenities, whereas battery producers would possibly face an prolonged interval of diminished demand for EV-related merchandise.
“It’s de facto inconceivable to retrieve trillions of gained value of investments which have already been made, so firms can’t assist however go away open all of the situations and always revise their methods with a purpose to obtain extra tax advantages and incentives even beneath a Trump presidency,” Kim Moon-tae, head of the trade coverage division on the Korea Chamber of Commerce and Business, mentioned.
Then-U.S. President Donald Trump speaks at america Metal Granite Metropolis Works plant in Granite Metropolis, Unwell., July 26, 2018. AP-Yonhap
Rising strain throughout industries
KIET anticipates {that a} second Trump presidency will put substantial strain on the metal trade, with dangers arising from potential tariff hikes. The administration is predicted to uphold Part 232 of the Commerce Growth Act, which presently enforces a 25 % baseline tariff on metal imports.
The protection trade can also be anticipated to face downward strain as Trump goals to create a U.S.-centric protection provide chain, leaving restricted alternatives for Korean protection contractors seeking to increase exports.
However, the Korea Atomic Industrial Discussion board (KAIF) anticipates {that a} second Trump presidency will expedite a return to fossil fuels, whereas additionally projecting development in nuclear vitality, significantly with the anticipated growth of small modular reactors (SMRs).
“Trump is predicted to reverse the Biden-Harris administration’s vitality insurance policies by selling fossil gasoline and nuclear energy growth whereas lowering authorities assist and incentives for renewable vitality,” Kang Goo-sang, head of KAIF’s financial analysis institute, mentioned. “Trump has persistently highlighted his aim of accelerating vitality manufacturing from home fossil fuels and increasing nuclear improvement. He asserts that this technique would decrease vitality prices, create jobs, and stimulate financial development.”
