The stock price of Hwaseung Enterprise has sharply declined this month. Following President Donald Trump's announcement on the 2nd regarding broader and higher tariffs than expected, analyses indicated that Hwaseung Enterprise's profits would see a significant drop. Hwaseung Enterprise sells 'Adidas' shoes produced in its Indonesian factory to the United States.

As the trade war intensifies, there are concerns about the impact on textile and clothing manufacturers with production bases in Southeast Asia. Domestic textile and clothing companies, which have lost competitiveness due to rising labor costs, have established production bases in Southeast Asia, including Vietnam, Indonesia, and Thailand.

However, with the United States indicating that it would impose high tariff rates in this region, there is a significant risk that investments will go to waste. Concerns have grown, leading to a substantial decline in the stock prices of textile and clothing companies with production facilities in this area.

U.S. President Donald Trump is holding a chart and announcing the mutual tariff imposition in the Rose Garden of the White House on Apr. 2. /Courtesy of Reuters
U.S. President Donald Trump is holding a chart and announcing the mutual tariff imposition in the Rose Garden of the White House on Apr. 2. /Courtesy of Reuters

According to the business reports submitted by listed companies, corporations including CJ, THE WILLBES&CO, META-BIOMED, DONG IN ENTECH, Good People, ESTec, SG CORPORATION, and JS Corporation have established local subsidiaries or production bases in Southeast Asian countries such as Cambodia, Indonesia, and Vietnam.

In particular, many textile and clothing manufacturers have their production bases in Southeast Asia. The WILLBES&CO, a textile and clothing company also engaged in education, has two production plants in Cambodia, one in Indonesia, and one in China. The WILLBES&CO produces products like knitwear and swimwear at its local factories and exports items under brands such as Gap and Old Navy using the original equipment manufacturer (OEM) method.

Good People, a corporation listed on the KOSDAQ that manufactures and sells underwear, has production facilities in Cambodia in addition to Gaeseong, North Korea. The local subsidiary in Cambodia generated a current revenue of 3.967 billion won and an operating profit of 129.5 million won, which accounts for 10% of total profits last year.

JS Corporation, which produces handbags and clothing, SG CORPORATION, an apparel export company, and DONG IN ENTECH, an outdoor consignment production company, also have textile product manufacturing bases in Southeast Asian countries. JS Corporation is currently producing products with factories located in Indonesia, Vietnam, and Cambodia, while SG CORPORATION operates 11 production subsidiaries in Cambodia and Vietnam, and DONG IN ENTECH has operations only in the Philippines.

The reason these corporations turned to Southeast Asian countries instead of China is that labor costs are lower than in China, which allows them to reduce their cost rates. The products produced in this manner are often exported using the OEM method, and most buyers and sales markets are based in the United States.

Graphic=Son Min-kyun

However, this time, President Trump has pointed to various countries as 'unfair trade nations', raising issues. The United States has defined countries that have a trade surplus with it as unfair trade nations and imposed high reciprocal tariff rates. The highest tariff rate imposed by the United States is 49% on Cambodia, followed by 48% on Laos, 46% on Vietnam, and 44% on Myanmar, particularly affecting Southeast Asian nations where many of our corporations have expanded. High reciprocal tariffs are also imposed on Thailand at 36% and Indonesia at 32%.

ZINUS, a subsidiary of Hyundai Department Store Group, has also been affected in stock price. ZINUS is a furniture manufacturing company that produces mattresses in Indonesia and China, mainly selling them in the U.S. ZINUS was planning to expand its factory in Cambodia, but faced a significant obstacle when the U.S. decided to impose high tariffs on Southeast Asian countries.

The basic tariff of 10% imposed by the United States will take effect from the 5th in Korean time, while the individual tariffs by country will apply from the 9th. The United States reiterated on the 6th (local time) that there is no possibility of postponing or delaying the reciprocal tariff imposition. Howard Rutnik, the U.S. Secretary of Commerce, stated in an interview with CBS that 'there will be no postponement of the reciprocal tariff. It will remain as is for a few days or a few weeks.'