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On Feb. 10, 2025 (local time), US President Donald Trump holds up an order adjusting tariffs on steel imports to the US as Commerce Secretary Howard Lutnick looks on. (AP/Yonhap)

Fears that South Korea’s steel exports to the US could be slapped with tariffs have become a reality, sending not only the domestic steel industry but also the automobile and semiconductor industries into panic mode. 

US President Donald Trump announced a flat tariff of 25% on all US steel and aluminum imports on Monday. “It’s 25% without exceptions or exemptions,” Trump told reporters in the Oval Office. 

Late last month, Trump announced that he was planning on imposing import tariffs on semiconductors and pharmaceuticals in the “very near future” to revive US production. Automobiles and semiconductors are South Korea’s top two exports, accounting for a third of the country’s total exports. The only way for Korean firms to work around these tariffs is to increase production in the US, but many companies face major obstacles to expanding investments on US soil. The recent developments are giving rise to concerns about major exporters taking a hit in profits. 

According to a proclamation issued by the White House on Monday, all steel imports to the US will be subjected to a 25% tariff starting March 12. An agreement made during the first Trump administration had allowed South Korea to export 2.63 million metric tons of steel to the US each year without duties, but no exceptions will be granted after the March date. Once the tariffs are in place, South Korean steel will inevitably be priced higher than steel produced domestically in the US. 

“The prices of US steel were higher compared to steel from other countries, so companies profited greatly from steel exports to the US. Going forward, however, there are concerns about steel companies seeing a reduction in sales and profits,” said Jang Sang-sik, the head of the Institute for International Trade at the Korea International Trade Association. 

“He [Trump] is also likely to impose tariffs on automobiles, which, like steel, the US is capable of producing domestically,” Jang added. 

Exports to the US account for 13.1% of South Korea’s annual steel exports (according to data for last year), the highest proportion among the major steel exporters. In order for companies like POSCO and Hyundai Steel to retain competitive prices relative to US producers after the tariffs, they will need to reduce their profit margins. On Feb. 11, share prices for POSCO Holdings dropped by 2,000 won (US$1.38) from the previous day, closing the trading day at 235,000 won (US$161.78). This was a drop of 24.6% (75,500 won) compared to share prices three months prior (Nov. 11, 2024).  

The automobile industry, the next target of Trump’s tariff offensive, is also on edge. US exports account for 49.1% of the domestic car industry’s exports of finished automobiles. A significant portion of the cars sold in the US by Hyundai Motor Group are manufactured in South Korean plants and then exported to the American market. According to the conditions of the current South Korea-US FTA, South Korean car exports are not subjected to tariffs. If Trump slaps a universal tariff on all car imports, South Korean automakers may take a hit in sales, as their current marketing strategy is to emphasize “bang for buck” compared to cars made by US manufacturers like Ford or GM. 

The calculations of the domestic semiconductor industry have also been complicated. As current conditions stand, it will be difficult for foundries (plants contracted by other firms to manufacture chips) like Samsung Electronics to meet US demands to increase investment on American soil. Going forward, the US is expected to continue leveraging its tariffs to exert pressure, presenting problems for South Korean chip manufacturers. 

Samsung Electronics’ foundry business has been in the red recently, and is currently in no position to increase investments. Increasing production in the US, where labor costs are higher, can lead to lower profit margins. This is a stark contrast to TSMC, which effectively has a monopoly on the foundry industry, which, for the first time in the company’s history, recently held a board meeting to discuss the option of increasing investments in the US. 

Moreover, South Korean exports of high-bandwidth memory (HBM) semiconductors have recently increased at a sharp rate; and the majority of Korea’s HBM exports go not to the US but to TSMC. But as the Trump administration’s trade policies come with a great deal of uncertainty, domestic chip producers are having a difficult time planning ahead. One anonymous insider in the semiconductor industry said, “Nothing concrete has been announced yet, so we’re just observing and analyzing the situation as things unfold.” 

The fallout from Trump’s aggressive tariffs is expected to be much greater than that during his first stint in the White House. Leaders Index, a business analytics think tank, released a report on South Korean exporters on Tuesday. Among South Korea’s top 500 exporters, 100 firms publish separate statistics and data regarding exports exclusive to the US. An analysis of these numbers by Leaders Index showed that their exports to the US increased during the first three quarters of 2023 by around 314 trillion won (US$216.14 billion), or 20%, compared to the 262 trillion won (US$180.35 billion) recorded in the same period of the previous year. This is because the South Korean market, which revolves around major firms like Samsung Electronics, SK Hynix, Hyundai Motor, and Kia, increased its overall reliance on exports to the US. 

By Park Jong-o, staff reporter; Jun Seul-gi, staff reporter; Lee Jae-yeon, staff reporter 

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