South Korea Sees Significant US Policy Impact, Seeks Trump Talks
(Bloomberg) -- South Korea’s government expressed concern about the “significant” impact on its economy likely to stem from US policy changes under Donald Trump and will seek talks with the US president to discuss cooperation as soon as possible.
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“The expansion of tariffs, as well as the termination of the Green New Deal policy and the abolition of mandatory purchase of electric vehicles, are expected to have direct and indirect effects on Korean economy,” the government said in a statement highlighting some of its concerns over strengthened protectionist measures.
South Korea has sent a working-level team to Washington to get more specific details of Trump’s plans while the government has already prepared action plans to minimize the negative impact of each issue, the statement said. Acting President Choi Sang-mok will seek phone talks with Trump, it added.
The comments come after Trump was sworn in as president for the second time and signed a barrage of executive orders. While Trump said he wasn’t ready yet to impose the universal trade levies he promised during the election campaign, he said he plans to impose tariffs of as much as 25% on Mexico and Canada by the start of next month.
South Korea is among nations expected to take a big hit if Trump imposes universal tariffs or ramped-up levies on exports from China. Korea’s reliance on export growth and trade surpluses leaves the economy vulnerable to any disruptions in global trade or restrictions impacting China, its largest trading partner.
The return of Trump coincides with South Korea’s worst constitutional crisis in decades after the impeachment and arrest of President Yoon Suk Yeol following his abrupt and short-lived imposition of martial law. The statement seemed aimed at reassuring the public that despite the political chaos in play, the government would deal effectively with the impact expected from US policy.
“Based on thorough preparation, Korea will build cooperative relationships with the new US administration so that the people do not need to feel anxious,” the statement said.
Separately, Choi said he would discuss in parliament the possibility of extra fiscal measures for the economy, a comment that hinted at the likelihood of an extra budget to help prop up sputtering growth.
Areas where Seoul could try to cooperate with or placate Washington include energy and food imports and shipbuilding.
South Korea is considering increasing its imports of US energy should trade imbalances between the two countries emerge as an issue with Washington. Trump is looking to slash US trade deficits with other nations. Seoul may also consider a plan to increase US food imports, according to a Bloomberg report last week citing people familiar with the matter.
The Bank of Korea already cut its benchmark interest rate in November to help brace the economy against Trump’s tariff plans. Last week, the BOK held the rate unchanged, adopting a wait-and-see mode until after Trump reveals more details of his trade policy.
A softening trend in export growth has raised concerns for South Korean policymakers at a time when consumer and business sentiment has weakened sharply after Yoon’s abrupt martial law declaration.
The central bank cut its growth forecast for this year on Monday amid concerns over the impact of the domestic political turbulence, the outlook for global trade under Trump and weakening overseas chip demand.
Early trade data showed weak export growth so far this month, as headwinds grow for the trade-reliant economy. Shipments adjusted for working-day differences expanded 1.4% in value from a year earlier in the first 20 days of January, according to data released Tuesday by the customs office. That compared with a 4.3% rise initially reported for the full month of December.
On an unadjusted basis exports fell 5.1%, reflecting fewer working days in the January period compared with last year. Overall imports decreased by 1.7% resulting in a trade shortfall of $3.8 billion.
The early trade report showed that exports to China unadjusted for working days fell 4.9% from a year earlier, while those to the US decreased 9.6%. Semiconductor exports increased 19.2% and automobile shipments declined 7.3%.
Semiconductors form the biggest driving force behind South Korea’s exports. The country is home to two of the world’s biggest memory-chip makers, Samsung Electronics and SK Hynix, exporting advanced semiconductors to US companies like Nvidia. But Korea’s chipmakers also face restrictions on some exports to China as Washington seeks to prevent Beijing from acquiring state-of-the-art devices needed to fuel artificial intelligence development.
Other South Korean companies are widely embedded across global supply chains, including automobiles, rechargeable batteries, shipbuilding and refined oil.
--With assistance from Sam Kim and Seyoon Kim.
(Updates with government statement)
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