Navigating the Shifting Sands: What a Second Trump Term Could Mean for US-Korea Trade
The recent resolution of initial tariff disputes between the US and South Korea under the Trump administration offered a temporary reprieve. However, a deeper dive reveals a complex landscape of lingering non-tariff barriers and emerging challenges, particularly as the possibility of a second Trump presidency looms. The initial agreement, finalized in November 2023, addressed headline tariffs on steel and automobiles, but the real battleground is shifting to digital trade and strategic industries like semiconductors.
The Sticking Points: Digital Trade and Regulatory Friction
The initial trade deal didn’t resolve disputes over digital trade practices. Recent incidents, like the data breach at Coupang – a South Korean e-commerce giant with US parentage – sparked accusations of discriminatory enforcement by Korean authorities. The US argued that the response was disproportionately harsh compared to similar incidents involving domestic companies. This highlights a growing tension: the US is increasingly scrutinizing how its companies are treated within foreign regulatory frameworks.
Further complicating matters, South Korea’s revised Information and Communications Network Act, dubbed the “anti-fake news” law, drew criticism from the US State Department for potentially stifling free expression and negatively impacting US-based online platforms. This underscores a fundamental difference in approaches to content moderation and digital governance. Similar concerns are surfacing globally, with the EU also enacting stringent digital regulations – the Digital Services Act (DSA) and Digital Markets Act (DMA) – creating a fragmented regulatory environment for tech companies. Learn more about the DSA and DMA.
Semiconductors: The New Flashpoint
Perhaps the most significant threat lies in the semiconductor industry. Reports suggest the Trump administration is considering imposing a hefty 100% tariff on memory chips imported from South Korea, or demanding that production be relocated to the US. This echoes a broader “reshoring” push, fueled by national security concerns and a desire to revitalize American manufacturing.
This pressure is already forcing South Korean giants like Samsung and SK Hynix to reassess their global supply chains. Samsung has announced a massive $17 billion investment in a new semiconductor plant in Taylor, Texas, partially in response to these pressures. Read Samsung’s announcement here. However, building new capacity takes years, and a sudden tariff imposition could severely disrupt the global chip market, impacting everything from smartphones to automobiles.
South Korea’s Strategic Response: Diversification and New Partnerships
Recognizing the risks, South Korea is actively diversifying its export markets. While the US and China remain crucial, exports to ASEAN nations and the European Union are steadily increasing. In 2023, ASEAN and EU saw export growth of 7.4% and 3.0% respectively, offsetting declines in exports to the US (down 3.8%) and China (down 1.7%).
Furthermore, South Korea is pursuing membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement that excludes the US. Joining the CPTPP would provide access to a vast, integrated market and reduce reliance on bilateral agreements with potentially unpredictable partners. This move signals a strategic shift towards broader regional economic integration.
Pro Tip: Businesses heavily reliant on trade with South Korea should proactively assess their supply chain vulnerabilities and explore diversification options. Staying informed about evolving trade policies and regulatory changes is crucial.
What Could a Second Trump Term Bring?
A second Trump administration is likely to double down on protectionist policies and aggressive trade tactics. Expect increased pressure on South Korea to further concessions in digital trade, potentially including data localization requirements and restrictions on cross-border data flows. The semiconductor issue will almost certainly remain a central point of contention.
The US could also leverage its security alliance with South Korea to extract favorable trade terms, potentially linking military cooperation to economic concessions. This could create a difficult dilemma for Seoul, forcing it to balance its security interests with its economic priorities.
FAQ
- What is the JFS in the US-Korea trade agreement? The JFS (Joint Fact Sheet) outlines the details of the agreement reached between the US and South Korea, specifically regarding tariffs and investment.
- What is the CPTPP? The CPTPP is a free trade agreement between 11 countries in the Asia-Pacific region.
- How are semiconductors involved in the US-Korea trade dispute? The US is considering tariffs on Korean-made semiconductors, potentially forcing companies to relocate production to the US.
- What is South Korea doing to mitigate trade risks? South Korea is diversifying its export markets and pursuing membership in the CPTPP.
Did you know? South Korea is the 5th largest export market for the United States, with over $93 billion in goods traded annually.
Explore our other articles on international trade and supply chain resilience for more insights.
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