Auto sector to be hit hardest by US tariffs among major S. Korean industries: BOK
Cars are parked to be shipped to overseas markets at a port in the city of Pyeongtaek, Gyeonggi Province, on April 2. Yonhap
Korea's auto industry is expected to suffer the most severe impact among major sectors from the United States' sweeping tariff scheme, the central bank said Thursday.
According to a report released by the Bank of Korea (BOK), the auto sector is projected to see a 0.6 percent decline in exports on an annual basis. In terms of export volume to the U.S., the industry would experience a 4 percent decline.
The analysis was based on the scenario in which the U.S. President Donald Trump administration maintains the current suspension in implementing reciprocal tariffs on its trading partners, including a 25 percent levy on South Korean goods, while a separate 10 percent baseline tariff and 25 percent levies on steel, aluminum and auto-related products remain in place.
The expected impact on the auto industry comes as exports to the U.S. market account for 47 percent of its total shipments as of 2024, while Chinese automakers have a minor presence in the U.S., making it difficult for South Korea to benefit from any competitive advantage.
"The impact of price increases following the new tariff policy on exports has not fully materialized, but it is expected to become more apparent over time," the BOK said.
In the case of the steel and aluminum industries, exports are expected to decline by 0.3 percent annually. In terms of volume of exports to the U.S. market, exports are forecast to fall by 1.4 percent.
Chip exports are projected to shrink by 0.2 percent annually, and exports to China could decline by 0.5 percent due to the impact of the U.S. tariff scheme, according to the report.
"The U.S. tariff scheme would cause not only a short-term decline in exports of cars, steel and other goods but also longer-term impacts as companies relocated production to U.S. soil to avoid tariffs. Such shifts would have broader effects on the overall economy and employment," the BOK said.
"It is crucial to strengthen technological competitiveness by securing talent in science and engineering," it added.