INTERVIEW Korea to weather tariff uncertainties with strong trade infrastructure, expansive FTA network: UN expert

U.S. President Donald Trump holds a chart next to U.S. Secretary of Commerce Howard Lutnick as Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C., April 2. Reuters-Yonhap

By Lee Kyung-min

• Published May 12, 2025 4:13 PM KST
• Updated May 12, 2025 5:55 PM KST

Korea’s strong trade infrastructure, comprehensive governance frameworks and expansive free trade agreement network position it well to navigate global tariff uncertainties, a senior researcher at a U.N. body said Monday.

The export-reliant economy will be able to leverage these strengths to tap into the growing market for cross-border digital trade, according to a team led by Rupa Chanda, director of trade, investment and innovation division at the Economic and Social Commission for Asia and the Pacific (ESCAP). The ESCAP is one of five regional commissions of the U.N.

Digitally delivered services are less vulnerable to tariffs but also ensure broader market access for goods and services through preferential trading arrangements — an area with strong growth potential for Korea, a global leader for digital and tech advancements, Chanda said.

“Korea consistently ranks among the top performers in ESCAP’s trade digitalization index,” she said in a recent interview with The Korea Times.

The index assesses the Asia-Pacific region for progress in paperless trade facilitation.

Strong customs efficiency, logistics systems and digital processes give Korean businesses the flexibility to adapt quickly when global trade conditions shift.

This ability to move goods faster, cheaper and more predictably is, in her view, a major competitive advantage in an environment of rising tariff barriers.

Korea is also well advanced in issuing comprehensive digital governance frameworks, as indicated by ESCAP’s tracking of digital trade regulations through the Regional Digital Trade Integration Index. This includes data protection, cybersecurity and emerging technologies.

“Korea is actively participating in emerging regional and bilateral digital trade agreements,” Chanda said.

Included are the Digital Economy Partnership Agreement, the Korea-Singapore Digital Partnership Agreement and other key international agreements for digital trade, such as the World Trade Organization Information Technology Agreement.

Beyond digital trade, she said Korea’s broader network of free trade agreements also strengthens its strategic positioning.

Data from Trade Intelligence & Negotiation Adviser, an ESCAP initiative, shows that Korea has one of the most extensive free trade agreement networks in the region, with agreements covering major economies such as the U.S., the European Union, China and Association of Southeast Asian Nations members.

“This diversified network serves as a platform that supports Korea’s ability to mitigate risks arising from global trade tensions and market concentration,” she said.

Korea as intermediate goods, services provider

A big part of Korea’s strength lies, the director said, in supplying critical parts, especially the semiconductors and electronics that other Asia-Pacific countries use to power their own export industries.

“Korea is not just exporting to the world, but exporting through the rest of the Asia-Pacific region,” she said.

For example, ESCAP data shows that in Vietnam’s exports to the United States, about 57 percent of the export value comes from imported inputs. More than 12 percent of those inputs originate from Korea.

“If you look specifically at electronics exports from Vietnam to the U.S., Korean inputs make up more than 33 percent of the value,” she said.

This means that Korean companies can still feel the shock when Asia-Pacific countries face trade barriers even if Korea is not directly targeted by tariffs.

That is because the demand for Korean intermediate goods and services shrinks.

ESCAP estimates that if the April 2 U.S. tariff rates are fully reinstated, the indirect exposure could be sizable, amounting to up to 0.7 percent of the country’s GDP.

Risk-specific response measures needed

Korea’s vulnerabilities vary depending on how close the industries are to the final consumer, how strategic they are to U.S. national security and how deeply they are embedded in global production networks, she said.

“Strengthening risk diagnostics across key sectors will be essential for ensuring resilience and competitiveness,” Chanda said.

In electronics, including semiconductors, the main concern is supply chain risk.

U.S. national security concerns make electronics extremely sensitive to compliance audits. Origin tracing rules, such as verifying the percentage of Chinese content, can block or delay products even without formal tariffs.

"Korea is highly vulnerable when it comes to semiconductors. Chips are Korea’s biggest export, and Korean companies like Samsung and SK hynix are central to global supply chains," she said.

The priority for Korea is supply chain mapping. This includes identifying critical inputs sourced from politically sensitive countries, particularly for advanced chips, substrates and specialty chemicals. This should then be integrated into proactively building alternative supplier networks.

“It is also necessary to identify which partner economies could trigger ‘origin tracing’ issues for Korean semiconductors or electronics under stricter U.S. rules,” she said.

In the automotive sector, she said, the main concern is market access risk.

U.S. political pressure to promote "Made in America" electric vehicles and support U.S. brands such as Tesla and GM is increasing both direct tariff threats and local content requirements.

“The priority here is to assess how tariff-driven price changes could shift U.S. consumer preferences away from Korean brands, and to explore FTA options to minimize the impact on market access and price competitiveness,” she said.