The U.S. Donald Trump administration's itemized tariff measures have led to a sharp decline in automobile and steel exports to the U.S. As President Trump recently announced plans to double the current 25% tariff on imported steel products to 50% starting June 4, there is speculation that steel exports may further decline.
The new government, which will be launched after next week's presidential election, faces the task of swiftly resolving the 'July package' to minimize uncertainty surrounding domestic industries.
According to the 'May export and import trends' report released by the Ministry of Trade, Industry and Energy on the 1st, last month's automobile exports to the U.S. amounted to $1.84 billion, a decline of 32% compared to the same month last year. Exports have decreased by double digits for three consecutive months after March (-10.8%) and April (-19.6%). Automobile parts exports also fell by nearly 10%. Last month's auto parts exports were $430 million, down 8.3% from the same month last year.
The Ministry of Trade, Industry and Energy explained that the U.S. tariff measures reduced export volumes, and increased local production from Hyundai Motor's new Georgia plant led to a decrease in automobile exports to the U.S.
The Trump administration imposed a 25% itemized tariff on all steel and aluminum products on March 12. Starting April 3, a 25% tariff was also applied to automobiles.
The day before imposing the car tariff, a plan for reciprocal tariffs by country was also announced. For Korea, a basic tariff of 10% and a reciprocal tariff of 15% were set. The 15% reciprocal tariff has been deferred until July 8, but the basic tariff of 10% is currently in effect.
Steel exports to the U.S. hit directly by the item tariff amounted to $220 million, a 20.6% decrease compared to the same month last year. There is an assessment that global steel prices are under downward pressure due to increased supply and that U.S. tariff measures have raised trade barriers for exports to the U.S.
In addition, exports of semiconductors and general machinery decreased by 17.6% and 5.6%, respectively. The Ministry of Trade, Industry and Energy explained that semiconductor exports to the U.S. decreased as corporations secured a significant inventory through pre-purchasing during the first quarter to mitigate tariff burden.
Among major items, petroleum products and secondary batteries showed a strong trend in exports to the U.S. The reduction in refinery facilities in the U.S. increased demand for domestic petroleum products, and the expansion of secondary battery supply to U.S. auto plants appears to have boosted exports of these two items.
Exports to China also fell significantly. Last month's exports to China were $10.42 billion, down 8.4% compared to the previous year. The Ministry of Trade, Industry and Energy diagnosed that the decrease in import demand due to production facility inspections led to a decline in petrochemical exports, while general machinery exports were affected by the real estate market downturn.
Regarding the May export and import trends, Minister Ahn Duk-geun of the Ministry of Trade, Industry and Energy said, “The U.S. tariff measures seem to be affecting the global economy and our exports,” adding, “We will accurately convey our position on tariff measures to the U.S. government and prepare a mutually beneficial solution.”
Currently, Korea and the U.S. are negotiating a comprehensive tariff package to be concluded by July 8. During the second technical dialogue held in Washington, D.C. from the 20th to the 22nd of last month, the two countries focused on six areas including balanced trade, non-tariff measures, economic security, digital trade, origin, and commercial considerations, addressing the issues raised by the U.S. side.
The next working-level meeting is expected to be held in the week of June 9, after the presidential election. A government trade official said, “The specific schedule will be decided after the new government takes office,” adding, “For the third technical dialogue, we plan to respond precisely based on collecting opinions from related ministries and stakeholders on the matters raised by the U.S. side, expecting to make progress in the discussions.”
The new government faces the situation of proceeding with trade technical consultations immediately after taking office. The trade industry is paying attention to the third technical consultation, anticipating it will serve as an opportunity to gauge the new government's trade policies and future negotiation direction.