U.S. President Donald Trump announced reciprocal tariffs on major trading countries on 2nd (local time), causing an alert in the industry, which has established production bases overseas due to production efficiency. Tariffs of several dozen percent per country will be applied to cars, steel, batteries, smartphones, home appliances, and various materials that have already been subject to item tariffs, weakening export competitiveness to the U.S.
The U.S. administration imposed a basic tariff of 10% on all trading countries worldwide and imposed individual tariffs on countries deemed to engage in unfair trade. The reciprocal tariff rates by country are ▲China 34% ▲EU 20% ▲Vietnam 46% ▲Taiwan 32% ▲Japan 24% ▲India 26% ▲Thailand 36% ▲Switzerland 31% ▲Indonesia 32% ▲Malaysia 24% ▲Cambodia 49% ▲UK 10% ▲South Africa 30%, among others. Korea has been subjected to a 25% tariff.
The basic tariff of 10% will take effect at 1:01 p.m. on the 5th Korean time (12:01 a.m. on the 5th local time), and the individual tariffs by country will come into effect at 1:01 p.m. on the 9th (12:01 a.m. on the 9th local time). Domestic corporations are focused on reviewing the impact of the tariffs on their business and formulating countermeasures.
The smartphone industry is expected to suffer the most damage. Vietnam, the largest smartphone production country for Samsung Electronics, has a reciprocal tariff rate of 46%. Over 50% of Samsung Electronics smartphones are made there, with most of the volume exported to the U.S. Smartphones are also produced in Korea, India, Brazil, and Turkey, but most are supplied locally or to nearby regions.
In Brazil and Turkey, a lower tariff rate of 10% has been applied, but it is reported that the local production capacity is insufficient for export to the U.S. India is also primarily producing mid-to-low-end models, leading to a shortage of volume for premium smartphone exports to the U.S.
The home appliance industry is also bound to be affected. Samsung Electronics and LG Electronics have primarily exported home appliances (including TVs) produced in countries like Vietnam, Thailand, and China, where labor costs are low. With the reciprocal tariff rates rising to 46% for Vietnam, 36% for Thailand, and 34% for China, the concerns for both companies have deepened. Fortunately, Samsung Electronics and LG Electronics have some production capacity in their home appliance plants in the U.S. and Mexico.
If produced in the U.S., no tariffs will be incurred, and according to the United States-Mexico-Canada Agreement (USMCA), Mexican-made home appliances will not incur tariffs upon export to the U.S. An industry insider noted, "For the time being, it appears that Samsung Electronics and LG Electronics will respond by increasing their production capacity in the U.S. and Mexico."
Semiconductors have been excluded from this reciprocal tariff application, but President Trump is expected to announce semiconductor tariffs soon. Samsung Electronics and SK hynix's semiconductor production bases are concentrated in Korea. Samsung Electronics has semiconductor plants in Austin and Taylor, Texas, and SK hynix plans to build a high-bandwidth memory (HBM) production facility in Indiana, U.S.
Companies producing various materials used in products exported to the U.S. will also be directly or indirectly affected by the tariff imposition. Hyosung and HS HYOSUNG produce key products like spandex and tire codes in Vietnam, where a 46% tariff is imposed. As of 2022, the accumulated investment in Vietnam amounted to approximately $3.9 billion (about 5.6 trillion won). Although they do not export significant volumes directly to the U.S., there is a possibility that clients with factories in Southeast Asia may demand price reductions. Additionally, they are concerned about sales declines due to reduced export volumes for major clients to the U.S.
Battery companies are indirectly affected by the tariffs. Major domestic battery manufacturers, such as LG Energy Solution, Samsung SDI, and SK On, have made large-scale investments in the U.S. over the past few years to secure local production bases. Batteries produced in the U.S. are exempt from tariffs and receive subsidies under the Advanced Manufacturing Production Credit (AMPC).
However, key materials used in batteries, such as cathode materials, are imported from companies like POSCO FUTURE M, L&F, Ecopro, and LG CHEM, which only have production facilities in Korea. The export scale of cathode materials, which account for about 40% of battery prices, reached $2.93 billion (about 4.3 trillion won) in 2023. When combined with anode materials and separators, the total export scale reached approximately $3.268 billion (about 4.8 trillion won). Among U.S. battery material import countries, Korea ranked first, accounting for 33.7%.
LOTTE Energy Materials, which produces copper foil for batteries, and SK Nexilis are also affected by tariffs. These companies have established factories in Malaysia, where electricity costs are low, and supply products to battery factories of Korean companies located in the U.S., Europe, and elsewhere. The U.S. has imposed a 24% reciprocal tariff on Malaysia.
Hyundai Motor and Kia are also bound to be impacted by U.S. tariff policies. While finished vehicles have been excluded from the U.S. tariff items, they are subject to a 25% item tariff under Section 232 of the Trade Expansion Act, which the Trump administration previously announced, effective from 1:01 p.m. on the 3rd (local time).
Last year, Hyundai Motor and Kia sold a total of 1.84 million vehicles in the U.S. (wholesale basis), of which 640,000 (1.02 million from Korea and 150,000 from Mexico) accounted for 64% of the total production. Hyundai Motor Group operates the Hyundai Motor Alabama Plant (330,000 units), Kia Georgia Plant (350,000 units), and Hyundai Motor Group Metaplant America (HMGMA·300,000 units) in the U.S. The group plans to respond to tariffs by gradually expanding production capacity at HMGMA.
Similarly, the steel industry, which is subject to a 25% item tariff, is also concerned about reduced exports. According to a report from Industrial Bank of Korea, the imposition of a 25% steel tariff is expected to result in an 11.47% decrease in export volume to the U.S. Considering the roughly $2.9 billion export volume of steel to the U.S. last year, the reduction is about $330 million (about 483.5 billion won). Hyundai Steel plans to construct a steel mill in the U.S., and POSCO is also reviewing its entry into the U.S.