On the 8th, U.S. President Donald Trump announced the possibility of tariffs on specific items, including semiconductors and pharmaceuticals, increasing uncertainty in exports to the U.S. Concerns have arisen that as the Trump administration's imposition of 'tariffs on specific items' shakes existing major export items to the U.S. such as automobiles and steel, exports in the semiconductor and bio sectors, which have recently increased significantly to the U.S., are likely to be impacted.
However, there are predictions that demand for high-performance semiconductors, such as high-bandwidth memory (HBM), which is essential for artificial intelligence (AI) development, will continue for the time being. Some observers suggest that the Trump administration's imposition of tariffs on semiconductors could stifle investment by U.S. corporations in the context of the U.S.-China competition for technological supremacy, essentially tying its own hands.
◇ In the first half of this year, semiconductor and bio exports to the U.S. showed double-digit growth
During a Cabinet meeting at the White House, President Trump told reporters, “We will announce tariffs on pharmaceuticals, semiconductors, and a few other items.” He did not mention specific details about the tariff rates on semiconductors or the timing of their announcement or implementation.
Regarding pharmaceuticals, he said, “We will give people about a year to a year and a half to come to the U.S. after which we will impose tariffs when they bring pharmaceuticals or other items. It will be a very high tariff rate, around 200%.” This is interpreted as allowing pharmaceutical companies about one to one and a half years to relocate their production facilities back to the U.S. before imposing tariffs.
Coincidentally, the semiconductors and pharmaceuticals (bio) mentioned by President Trump have recently emerged as key export items to the U.S. for Korea. Despite the overall 3.7% decrease in exports to the U.S. in the first half of this year compared to the same period last year due to the tariff policies, exports of semiconductors and bio items to the U.S. recorded a growth rate of over double digits. They are evaluated as a twin horse driving the export performance during the trade crisis.
According to the Ministry of Trade, Industry and Energy, the total semiconductor export amount to the U.S. in the first half of this year was $4.97 billion, reflecting a 14.7% increase compared to the same period last year. The demand for high-performance Korean semiconductors increased based on the need for AI development in the U.S., contributing to the rise in U.S. semiconductor exports. The export amount of bio products to the U.S. was $1.66 billion, marking a 34.7% increase compared to the previous year. The demand for biosimilars and contract manufacturing surged, significantly boosting export figures.
Industry insiders suggest that if the U.S. implements tariff measures on semiconductors and pharmaceuticals, the exports of these two items, which were in a growth phase, may face stagnation similar to that experienced by automobiles and steel due to the impact of specific tariffs.
In the first half of this year, the export amount of automobiles to the U.S. was $15.34 billion, a 16.8% decrease compared to the same period last year. This decline is primarily attributed to the increased production of automobiles in the U.S. and the weakening price competitiveness of Korean cars due to the imposition of tariffs. The export amount of steel to the U.S. stood at $1.94 billion, marking an 11.2% drop from last year. The analysis from the Ministry of Trade indicated that the impact of the U.S.'s high tariff policies and market uncertainties was significant.
◇ “Semiconductors are different from automobiles”… Some view it as the U.S. tying its own hands
Just as tariffs on automobiles and steel led to their export decline, could tariffs on semiconductors and bio products lead to a decrease in exports of Korean semiconductors? Within the government, there is a view that “the short-term impact will likely be limited.”
An official from the Ministry of Trade stated, “It is not a situation where semiconductor production can be increased immediately in the U.S.” He noted that “while it may attract an increase in domestic production in the medium to long term, the demand for high-performance Korean semiconductors will continue amid fierce technological competition.”
An industry representative remarked, “The situation for automobiles, which are easily substitutable B2C products, is different from that of semiconductors, which are C2C products. Corporations have specific specifications they require, and there is a tendency to prioritize technology over price.” He added, “The fact that Taiwan, our main production country, is also likely to be subject to tariffs means that the conditions are not solely disadvantageous for our semiconductor companies.”
There are also observations that the Trump administration's tariff imposition on semiconductors may stifle technological investment demand in advanced U.S. industries, weakening the technological edge. The burden of expense for U.S. big tech companies, which require high-performance semiconductors for superintelligent AI development, may increase, potentially narrowing the technological gap with China, which aspires to achieve a technological leap.
Jang Sang-sik, head of the Korea International Trade Association Foreign Trade Research Institute, stated that “in the medium to long term, it seems to be a strategy to attract semiconductor production facilities to the U.S. and secure an advantage in negotiations with allied nations.” However, he also evaluated that “the imposition of tariffs on semiconductors could reduce investments by U.S. big tech companies and weaken their technological competitiveness.”
In the case of bio and pharmaceuticals, it is a relief that President Trump mentioned that the implementation timing would be delayed for about ‘one year to one and a half years,' indicating that there is not an immediate burning crisis.
Currently, bio corporations are individually moving to establish contingency measures such as signing contract manufacturing (CMO) agreements in the U.S. Some companies are also reportedly considering acquiring firms that have production facilities in the U.S.
Heo Hye-min, a researcher at Kiwoom Securities, said, “There had been mentions about tariffs on pharmaceuticals since the beginning of the year, and exporting corporations have already been preparing by stockpiling and promoting CMO contracts, so the direct impact is expected to be minimal.”
However, there are clear long-term negative factors. The U.S. is the largest pharmaceutical market in the world and the biggest export destination for domestic pharmaceutical companies. There are even criticisms that the ‘200%’ tariff rate suggested by President Trump is unrealistic.
Heo added, “The tariff rate of ‘200%’ mentioned by President Trump in his remarks was an unexpected level,” and “The situation calls for a review of the potential repercussions of high tariffs.”
Lee Jae-guk, vice chairman of the Korea Pharmaceutical and Bio-Pharma Manufacturers Association, stated, “A tariff rate of 200% is an unreasonable figure, essentially meaning to abandon the U.S. market,” and added, “Considering the backlash from patient organizations, I believe this tariff rate would be difficult for President Trump to enforce.”
The vice chairman continued, “President Trump stated he would grant a one-year grace period for foreign companies to establish production facilities in the U.S., but completing a highly precise production facility, such as a bio factory, within one to one and a half years is physically challenging.” He further noted, “While I understand the intention to bring back key production facilities to the U.S. based on the principle of prioritizing domestic production, the feasibility remains in question,” adding that “this is an issue that should be jointly addressed by the public and private sectors as the situation continues to be monitored.”