“When the US-led tariff and trade war spreads around the world, Korea’s export economy may fall into crisis given its high reliance on trade,” said Joo Won, chief of Hyundai Research Institute’s economic research division, in his report released Monday.
Korea’s dependence on foreign trade was 63 percent in 2016, according to Statistics Korea, with the US and China being the biggest trade partners. The dependence is based on the combined volume of exports and imports in proportion to gross national product.
“The worst scenario is the repetition of the US move to raise tariffs and other nations’ response with retaliatory tariffs. The repetitive move may lead to the global trade war,” he said, adding, the government, industrial organizations and companies should be prepared for such scenario.
In January, the Trump administration decided to impose a 50 percent tariff on Korean washers exceeding 1.2 million units annually in order to protect the US appliance industry. The US International Trade Commission predicted the move will halve the volume of Korean washers sold in the US from the current 3 million units.
The Korean firms, Samsung and LG, will also inevitably raise the price of their washers that will hurt the price competitiveness. LG Electronics already informed US retailers of price increases in its washers last week, with markups of around $80 to $90, according to industry sources.
This month, the Trump administration signed an order to impose a 25 percent tariff on imported steels and a 15 percent tariff on aluminum, arguing the levies were necessary for national security.
Around 70 percent of Korean steel exports to the US are expected to be hit by the measure, according to the Korea International Trade Association. Korea’s steel exports to the US stood at $3.2 billion last year, trailing only Canada and Brazil.
Local steel pipe firms, including SeAh Steel, Nexteel and Husteel, will be hit hardest among them. Their exports to the US account for more than half of Korea’s total steel exports to the US.
By Shin Ji-hye (firstname.lastname@example.org)