On the 20th (local time), when Donald Trump became the President of the United States, the domestic fashion and beauty industries are on high alert. Concerns are rising over the weakened export competitiveness due to the strengthening trend of protectionism and tariff increases, prompting the fashion and beauty sectors to struggle with countermeasures.
According to the related industry on the 22nd, President Trump officially announced the establishment of the External Revenue Service (ERS) immediately after taking office and instructed the Office of the United States Trade Representative (USTR) to conduct a comprehensive review of existing trade agreements.
In particular, he indicated plans to impose a 25% high tariff on Mexico and Canada starting next month, suggesting that the 'America First trade policy' is about to become fully operational.
There is a high possibility of an additional 10% universal tariff on imported beauty products from Korea. The financial investment industry predicts that the protectionist policies of the second Trump administration will bring significant changes to the global supply chain.
Major cosmetics and fashion corporations, which are highly dependent on the U.S. market, have already expressed their sense of crisis in their New Year's addresses.
Suh Kyung-bae, chairman of Amorepacific Corporation, said, 'Global consumer demands and expectations are becoming more segmented, and the domestic market is facing challenges with continued stagnation.'
Last year, Korea's cosmetics export value reached a record high of $10.2 billion. Of this, the U.S. market accounted for $1.9 billion, making it the second largest market after China ($2.5 billion). If an additional 10% tariff is imposed on Korean products, price competitiveness in the U.S. market will inevitably weaken.
An official from the cosmetics industry noted, 'While the first Trump administration pressured issues limited to Korea's current situation, like defense costs, the second Trump administration will deal a heavy blow to the domestic cosmetics industry exporting mid-range and low-priced products.'
The fashion industry is also in a state of emergency. With the won-dollar exchange rate still high (due to the weakened value of the won), a rise in production costs is unavoidable for the fashion industry, which relies heavily on imported raw materials.
An official from the Korea Fashion Industry Research Institute stated, 'The Trump administration's protectionist policies will lead to an increase in global supply chain expenses, particularly for clothing manufacturers whose raw material procurement costs may rise by 20-30%.'
Such a sense of crisis is being reflected in the business plans of major corporations this year. Large fashion corporations are conservatively managing inventory while focusing on strengthening premium product lines with high profitability.
Small and medium-sized brands, which find it difficult to enter the U.S. market, are instead challenging the European market.
The Korea Creative Content Agency introduced K-fashion through a fashion show featuring Ink (Lee Hye-mi), LiEE (Lee Joon-bok), and Muham (Park Hyun) for the first time in Paris after New York last year. Major fashion and distribution groups are also announcing plans for brand portfolio diversification and supply chain restructuring to manage risks.
Experts evaluate that the uncertainty in the fashion and beauty industries is increasing enough to raise the possibility of renegotiating the Korea-U.S. Free Trade Agreement (FTA). There is a prevailing outlook that the second Trump administration will impose stronger trade pressure on Korea, which ranks eighth among trade deficit countries.
The Korea Economic Research Institute stated, 'If the FTA is renegotiated, industries like cosmetics and fashion are likely to become new targets of trade pressure,' and emphasized the urgency of establishing preemptive response strategies at the government level.
The Korea International Trade Association also predicted, 'The strengthening of U.S. protectionism could lead to a restructuring of the global supply chain,' adding that 'corporations should prepare risk management plans such as diversification of export countries and expansion of local production.'
The fashion and beauty industries are also showing movements to turn this crisis into new opportunities. Major Original Design Manufacturer (ODM) companies like COSMAX and Kolmar Korea are emphasizing the search for new growth opportunities through environmentally friendly product development and digital innovation.
They are free from the issues of tariff increases due to having factories in the U.S. If protectionism strengthens, there is also a high possibility that demand for companies without production facilities in the U.S. will increase.
Fashion companies are also focusing on securing future growth drivers, such as building smart factories and developing eco-friendly materials. Ultimately, if the second Trump administration accelerates the move to de-Chinese clothing supply chains, domestic fashion companies with major production bases in Southeast Asia and Central America may also reap unexpected benefits.
Lee Han-young, a senior researcher at the Korea Institute for International Economic Policy, stated, 'Corporations should establish foreign exchange hedge strategies to prepare for increased exchange rate volatility and focus on strengthening product competitiveness through research and development investments.'