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South Korean corporations worry that President Yoon Suk Yeol’s impeachment following a failed try to impose martial legislation this month has undermined efforts to foyer Donald Trump’s incoming administration to guard their exports and investments within the US.
The US president-elect has threatened to impose sweeping tariffs and assessment beneficiant subsidies for corporations to spend money on the US, together with these for America’s allies and largest buying and selling companions.
However latest political turmoil in Seoul has left the marketing campaign to counter Trump’s commerce protectionism rudderless, based on a number of individuals concerned within the lobbying effort who described the South Korean authorities’s diplomatic efforts as “paralysed” and “absent” within the wake of Yoon’s aborted energy seize.
“There is no one from the government to represent the Korean interest just when we need it the most,” mentioned an individual representing a conglomerate that invested billions of {dollars} within the US throughout outgoing President Joe Biden’s time period.
“It is not possible for us to withdraw our investments now,” the individual added. “We are like in a hostage situation.”
Trump-related dangers for South Korea’s export-reliant economic system vary from across-the-board import tariffs to the doable revocation of subsidies for Korean chip, battery and electric-vehicle makers promised by Biden. The Korean semiconductor business can be uncovered to extra aggressive US export controls on China.
The specter of commerce disruption additionally comes at a time when Asia’s fourth-largest economic system is already wrestling with weak home demand, hovering non-public borrowing and intensifying competitors from Chinese language exporters.
On Wednesday, South Korea’s international minister Cho Tae-yul acknowledged that the political turmoil had disrupted diplomatic efforts, including: “We are fully committed to regaining that momentum as quickly as possible.”
Yeo Han-koo, a former South Korean commerce minister now on the Peterson Institute for Worldwide Economics in Washington, mentioned that even earlier than the political disaster, “the feeling in Seoul could be described as anxiety bordering on panic”.
Korean policymakers and enterprise leaders have been “traumatised” by Trump’s first time period, mentioned Yeo, when the US president threatened to cancel a bilateral free commerce settlement and take away American army forces from the Korean peninsula until Seoul contributed extra to their repairs.
A survey of 239 corporations launched by the Korea Enterprises Federation this month discovered 82 per cent anticipated South Korea’s economic system could be harmed by Trump’s anticipated protectionist insurance policies.
However Yeo urged that some Korean fears have been “overblown”, arguing that “much has changed” since Trump was first elected in 2016. South Korea was the most important supply of international direct funding within the US final 12 months, with corporations investing tens of billions of {dollars} in US manufacturing services for chips and inexperienced applied sciences.
“More than perhaps any other country, South Korea can argue it is contributing to a revival in US manufacturing, and that it deserves a place within the walls of Fortress USA,” Yeo mentioned.
South Korea’s commerce surplus with the US was $28.7bn within the first half of 2024, based on the Korea Worldwide Commerce Organisation, and is ready to overhaul final 12 months’s file of $44.4bn, elevating issues that Trump, who’s delicate to US commerce deficits, might goal the nation once more.
Nonetheless, an govt from one in every of South Korea’s main business associations mentioned that latest conversations with individuals anticipated to serve in Trump’s administration urged that current investments would do little to sway the incoming president and his interior circle.
“We tried to appeal to them by stressing the fact that Korea was the biggest foreign investor and created lots of jobs,” the chief mentioned. “But we were told that it doesn’t matter for Trump as he is more interested in what the Korean companies will do from now on. He doesn’t want to hear what they did during the Biden administration.”
One other individual conversant in the Korean lobbying effort mentioned one “specific concern” was the return of Peter Navarro, Trump’s former commerce envoy, as a senior financial adviser.
Trump this month praised Navarro, who beforehand accused Korean conglomerates Samsung and LG of “trade cheating” by relocating manufacturing to keep away from antidumping measures, for serving to renegotiate “unfair Trade Deals like Nafta and the Korea-US Free Trade Agreement”.
Analysts mentioned Korean corporations have been unlikely to keep up their scale of funding given the challenges they have been already dealing with, starting from excessive prices of building, labour and childcare to a scarcity of expert labour, difficulties securing visas and dependable energy provide. A weak South Korean gained and lagging demand for EVs have been additionally dampening enthusiasm.
Lee Tae-kyu, senior fellow on the Korea Financial Analysis Institute (KERI), mentioned South Korea’s economic system might obtain a modest enhance if Trump’s tariffs targeted narrowly on Chinese language exports, pointing to shipbuilding, defence and petrochemicals as areas the place Korean corporations stood to profit.
Seoul might additionally cut back its commerce surplus by shopping for extra American arms and fossil fuels, Lee added.
However Korean battery and EV makers might face a nightmare state of affairs if Trump have been to achieve a grand cut price with Beijing on commerce that allowed Chinese language rivals to arrange their very own vegetation within the US — one thing the incoming president has mentioned he would take into account.
“If Chinese companies are allowed to build plants in the US, that will be a disaster for us,” mentioned a Korean battery business govt. “But even our government officials don’t seem to know who to talk to in Washington to deliver our concerns.”
