By Jihoon Lee and Heekyong Yang
SEOUL (Reuters) – South Korea’s trade minister said on Wednesday he saw domestic companies investing more in the United States if the next U.S. administration introduces higher tariffs.
He made his comments just hours after Republican Donald Trump’s victory in the 2024 U.S. presidential election.
Trade Minister Cheong In-kyo cautioned that it was difficult to comment on other countries’ elections but that if the United States takes protectionist measures the South Korean government would engage in trade diplomacy, while individual companies might move more quickly.
“If tariffs get raised, the first alternative firms can consider will be raising direct investment and on-site production,” he said in an interview with Reuters when asked how Trump’s trade and tariffs policies would impact the South Korean auto industry.
“There are ongoing investments already, and there is a possibility that investment could accelerate, followed by an increase in U.S.-bound exports by small and medium-sized parts manufacturers,” Cheong said.
Trump has floated the idea of imposing blanket tariffs of 10% to 20% on all U.S. imports, which a South Korean state-run think tank estimated last week would cause the trade-dependent economy to lose as much as $44.8 billion in exports.
That would be a blow to major exporters, especially South Korean automakers which rely more on domestic production than Japanese rivals for its vehicles sold in the United States.
Trump has also threatened to impose a 200% tariff on some imported cars, a move likely to hit multiple Asian automakers including Honda Motor, Nissan Motor and Hyundai Motor.
South Korean companies’ investment in the U.S. amounted to $27 billion last year, about 44% of the overall investment by Korean firms overseas, trade data showed. That share is the highest since 1998, the Korea Trade Investment Association said in May.
Cheong said the trade ministry has prepared ways to respond to several scenarios and it will consult with the next administration after channels for dialogue are established.
“Still, relations between South Korea and the United States will not be greatly affected even if the current situation remains unchanged,” Cheong said.
“We can only respond to the new administration’s policy. Nevertheless, we will make efforts for trade to remain smooth, with not only the United States, but also China,” Cheong said.
South Korea’s export growth weakened in October to a seven-month low, missing market expectations, after Asia’s fourth-largest economy barely grew in the third quarter on slowing exports.
Cheong said this year’s exports were still expected to exceed last year’s and vowed response measures to factors raising uncertainty over next year’s trade conditions, including political events.
South Korea’s trade surplus with the United States hit a record $44.4 billion in 2023, bigger than with any other country, with exports of cars accounting for nearly 30% of total U.S.-bound shipments.
Shares of South Korean automakers and battery firms, including Hyundai Motor and LG Energy Solution, dropped on Wednesday, with analysts attributing the declines to worries about potential tariffs.
(Reporting by Jihoon Lee and Heekyong Yang, Editing by Angus MacSwan)
