South Korea prepares full emergency response as US tariffs take effect

Nurluqman Suratman

14-Mar-2025

SINGAPORE (ICIS)–South Korea is initiating full emergency response measures as US steel and aluminum tariffs take effect, aiming to mitigate the impact on its economy, which is already grappling with weak exports and domestic consumption.

  • US reciprocal tariffs, automotive tariffs to bite
  • Hyundai Steel enters emergency mode due to tariff-induced financial strain
  • 2024 export surplus at risk as global tariff war escalates

The South Korean Ministry of Trade, Industry and Energy (MOTIE) convened a meeting with stakeholders on 12 March to strategize in response to the US’ newly implemented 25% tariffs on steel and aluminum imports.

The MOTIE meeting was organized to “further strengthen the joint public-private emergency response system in preparation for the US administration’s steel and aluminum tariff measures, the anticipated imposition of reciprocal tariffs in early April, and tariffs on specific items such as automobiles”, the ministry said in a statement.

“We will further strengthen the response system ahead of the anticipated imposition of reciprocal tariffs in early April and do our utmost to protect the interests of our industry,” industry minister Ahn Duk-geun said.

“We will closely conduct high-level and working-level consultations with the US, including the head of the Office of Trade, and monitor the response trends of other major countries to minimize any disadvantages to our industry,” he added.

South Korea’s trade minister Cheong In-kyo is currently in the US from 13 to 14 March to discuss trade issues including reciprocal tariffs and investment projects with his counterparts, MOTIE said in a statement on 12 March.

Cheong will meet with officials at the US Trade Representative for consultations on the tariff issue, as well as investment plans by South Korean companies in the world’s biggest economy.

According to data from the US International Trade Administration (ITA), South Korea was the fourth-largest exporter of steel to the US last year, accounting for 9% of Washington’s steel imports.

The northeast Asian country was also the fourth-biggest exporter of aluminum to the US, comprising about 4% of US aluminum imports.

Hyundai Steel Co, South Korea’s second-largest steelmaker after POSCO, has entered emergency management mode due to increasing market pressures, local media reported on Friday.

The company has implemented a 20% salary reduction for all executives, effective 13 March, according to South Korean news agency Yonhap.

Further measures include a review of voluntary retirement options for staff, along with plans to drastically reduce operational expenses, including limiting overseas travel.

The US tariffs on all steel imports have significantly worsened the company’s financial outlook, the Korea Times said.

EMERGENCY EXPORT MEASURES
The South Korean government on 18 February announced emergency export measures consisting of four pillars: tariff responses; a record won (W) 366 trillion ($253 billion) in export financing; export market diversification; and additional marketing and logistics support.

South Korea is a major importer of raw materials like crude oil and naphtha, which it uses to produce a variety of petrochemicals, which are then exported. The country is a major exporter of aromatics such as benzene toluene and styrene.

Government officials have expressed concern that export conditions are expected to worsen considerably in the first half of the year but improve in the second half, defining the current situation as “an emergency” and “the last opportunity to maintain the export growth momentum”.

South Korea achieved record-breaking exports and a trade surplus in 2024, with exports reaching $683.7 billion and the trade balance showing a $51.6 billion surplus.

A major concern is increased risks amid the trade protectionist stance of the US under President Donald Trump which could trigger a full-scale global tariff war.

In February, South Korea’s export growth inched up 1% year on year to $52.6 billion, accompanied by the first decline in chip exports in 16 months which offset strong automobile and smartphone shipments.

“The first half of the year is expected to be particularly difficult for exports due to the convergence of three major challenges: the launch of the new US administration, continued high interest rates and exchange rate volatility, and intensifying competition and oversupply in advanced industries,” according to S Korea’s government ministries.

Concerns include falling prices of major export items and a decrease in import demand in key markets as well as expectations of weak oil prices following the end of production cuts by OPEC and its allies (OPEC+) and the US pro-fossil fuel policies.

South Korea’s slowing import demand, the US’ increased local production, EU’s electric vehicle market challenges and global contractions in manufacturing and construction markets are also causes for concern.

These factors are expected to particularly affect exports of major items such as semiconductors, automobiles, petrochemicals, and machinery in the first half of the year.

There are also worries about lower exports in critical sectors due to falling unit prices and oil prices, along with the risk of reduced demand in the US and EU for automobiles and general machinery due to market challenges and the contraction of the construction market.

South Korea’s GDP growth this year is projected at 1.5%, down from its previous estimate of 1.9% and lower than the 1.6% to 1.7% range indicated in January.

For 2024, South Korea’s final GDP growth was confirmed at 2.0%, matching the preliminary estimate released in January.

The economy is experiencing a slowdown in the recovery of domestic demand, including consumption and construction investment, coupled with continued employment difficulties, particularly in vulnerable sectors, according to the Ministry of Economy and Finance’s monthly economic report released in Korean on Friday.

“While geopolitical risks persist in the global economy, uncertainties in the trade environment are also expanding, such as the realization of tariff impositions by major countries,” it said.

“The government will continue to work hard on supporting exports and responding to uncertainties in the trade environment.”

Focus article by Nurluqman Suratman

Thumbnail image: Trade cargo containers at Busan port, South Korea – 1 February 2025. (YONHAP/EPA-EFE/Shutterstock)

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