Korea Likely to Face High Tariffs
The Korea Economic Research Institute said that South Korea's auto trade balance will be reduced by up to US$9.8 billion if the United States imposes 25 percent tariffs on imported cars and auto parts based on Section 232 of the Trade Expansion Act of 1962.
The institute said that 25 percent U.S. tariffs will decrease Korea's auto trade balance by US$5.2 billion and retaliatory tariffs from opponent countries will increase the amount to US$9.8 billion. It also said that the United States’ unilateral tariff imposition will decrease the industry’s total output by 4.4 percent.
According to the institute, Korea's auto trade balance is estimated to fall by up to US$7.8 billion if Canada and Mexico are exempted from 25 percent U.S. tariffs in accordance with the United States–Mexico–Canada Agreement (USMCA). If South Korea is exempted together, the trade balance can increase by up to US$7.2 billion. Then, the total output of the industry can increase by 4.1 percent to 5.6 percent.
The institute pointed out that South Korea is likely to have to face high tariffs in view of the United States’ huge trade deficit with South Korea in the automotive industry although the European Union and Japan are main targets as of now. “The total output of the local automotive industry will be reduced by 8 percent if the European Union, Japan, Mexico and Canada are exempted with the exception of South Korea,” it added.