As the 'second term of Trump's administration' is expected to take place, attention is being paid to the impact it will have on our economy. Former President Trump is predicting strong protectionism, which is expected to increase uncertainty in our economy, including large-scale tariffs and supply chain reorganization.
In the US presidential election held on the 5th (local time), it is certain that Republican candidate former President Donald Trump will be elected as the 47th president.
The 'Trump second term' administration is expected to strengthen protectionism with tariff policies. In particular, it is highly likely that an all-out tariff policy will be implemented to reduce the United States' large trade deficit.
Former President Trump said at a rally, "Our allies have treated us more unfairly than the so-called 'enemies,'" and declared a universal tariff of up to 10% on allies, including Korea.
This tariff policy is likely to have a direct negative impact on Korean exports. The Korea Institute for International Economic Policy (KIEP) also released an analysis that said Korea's total exports could decrease by up to 61.7 trillion won due to Trump's election. Additionally, it was predicted that gross domestic product (GDP) could fall by about 0.67%.
In addition, former President Trump pledged 'de-coupling', which would reduce or cut off trade relations with China across all industries.
The high tariff rate of up to 60% suppresses not only product trade but also the overall scope and level of exchange with China, including financial investment, intellectual property, human resources, and research and development.
China is Korea's largest trading partner. The analysis is that if exports of Chinese finished products to the United States decrease due to the United States' checks, this will inevitably have an impact on Korea, which exports intermediate goods to China.
In a report titled ‘Evaluation of exports to China and implications considering supply chain connectivity’ last August, the Bank of Korea estimated that if tariffs were increased as Trump intended, Korea’s production linked to exports to China would decline by more than 6%.
However, there are also observations that in some industries, such as semiconductors, Korea could benefit from the United States' checks on China.
In particular, there is an analysis that Korean companies may replace a certain portion of the auto parts supply chain due to the U.S. blockade of entry into the Chinese electric vehicle market. Former President Trump announced that he would impose tariffs of more than 60% on Chinese cars.
The strong dollar and exchange rate uncertainty are also a burden on the Korean economy.
On the 6th, the weekly trading closing price of the Korean won to U.S. dollar exchange rate in the Seoul foreign exchange market (as of 3:30 p.m.) was calculated to be 1,396.2 won, up 17.6 won from the previous day.
The last time the won-dollar exchange rate exceeded 1,400 won was on November 7, 2022 (1,401.2 won) based on the closing price.
Some export companies can secure price competitiveness due to the decline in the value of the won, but most companies that must purchase raw materials to make products face an inevitable deterioration in profitability.
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