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U.S. Likely to Impose High Tariffs on Semiconductors Next Year
Trade Protectionism Biting into Korean Economy
U.S. Likely to Impose High Tariffs on Semiconductors Next Year
  • By Jung Suk-yee
  • November 14, 2018, 11:47
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The ongoing trade disputes between the U.S. and China are about to bite into Korea's exports, including semiconductors and automobiles.

Korean exporters are groaning under mounting U.S. trade protectionism. According to industry sources, President Donald Trump is likely to put pressure on the Korean semiconductor industry, as well as the automobile industry, by imposing excessive tariffs based on Section 232 of the Trade Expansion Act of 1962.

The Federation of Korean Industries said on Nov. 13 that there is an 80 percent change of Washington applying the section to the South Korean semiconductor and automotive industries in 2019. The Korea Semiconductor Industry Association explained that the U.S. is likely to apply the section next year in order to keep China at bay in high-tech industries.

South Korea’s exports to China account for as much as 40% of its total exports.

The Korea Automobile Manufacturers Association agreed, saying, “The U.S. set an upper limit on automobile imports from Mexico based on NAFTA revision, and similar trade restrictions may be applied to South Korea as well.”
 

As of October this year, semiconductors accounted for more than 20% of South Korea’s total exports. In addition, semiconductors, vehicles and auto parts represented 32% of the total. U.S. tariffs on those items can have a significant impact at a time when global DRAM price is showing a downtrend and South Korean automakers posted a negative earnings surprise in the third quarter.

According to local industrial associations, the ongoing trade disputes between the U.S. and China are about to spread to the entire world and steel, petrochemical, automobile and wireless communication equipment exports from South Korea are forecast to fall 10%, 5%, 3% and 0.5% next year, respectively. Semiconductor and display exports are predicted to show little change.