(News Focus) S. Korean businesses brace for 'Trump Shock'
By Byun Duk-kun
SEOUL, Nov. 9 (Yonhap) -- South Korean businesses offered mixed reactions to the outcome of the U.S. presidential election Wednesday, but many feared what they called an impact from an inevitable change in trade relations with the United States under U.S. President-elect Donald Trump's 'America First' policy.
Throughout his election campaign, the new Republican president had consistently and repeatedly advocated what many believed to be protectionist trade measures that include punitive tariffs on all shipments from China and Mexico.
He has also displayed his clear dislike of free trade deals, including the Korea-U.S. free trade agreement (KORUS FTA) that went into effect in March 2012, which he has called a "destroyer" of U.S. jobs.
In an earlier interview with Yonhap News Agency, Walid Phares, a foreign policy advisor to Trump, said the real estate tycoon, if elected, may want to "go back to ground zero" on all FTAs the U.S. has signed, including the KORUS FTA, suggesting a Trump administration may demand renegotiation of all existing FTAs.
An official from South Korea's trade ministry noted renegotiation of the KORUS FTA was possible, at least in theory, but only if the U.S. was willing to cancel the deal altogether, along with the Korea-U.S. alliance.
"The FTA is not just a trade pact, but an addition to the countries' longstanding alliance that was meant to further bring the two military and political allies closer also in terms of trade and economic relations," the official said, asking not to be identified.
The Ministry of Trade, Industry and Energy has said a renegotiation of the Korea-U.S. free trade deal will first require the U.S. to declare its cancellation of the agreement, a move that could seriously undermine the country's credibility in the international community.
Should a renegotiation of the KORUS FTA take place, it will not have come at a worse time, local analysts noted.
Alabama senator Jeff Sessions (3rd from R), a top Trump surrogate, poses with South Korean business leaders in Washington D.C. on Sept. 21, 2016. (Yonhap file photo provided by the Korea International Trade Association)
South Korea's exports had dropped for 19 consecutive months between January 2015 and July 2016 until they gained 2.6 percent on-year in August. They again dipped 5.9 percent from a year earlier in September, followed by a 3.2 percent drop last month.
South Korea's shipments to the United States slipped 5.4 percent on-year in the first seven months of the year, but the U.S. continues to remain the world's second-largest importer of South Korean goods after China, the trade ministry said earlier.
South Korean firms expressed both hopes and concerns.
Many said the new Trump administration will inevitably cause a drop in South Korean exports to the U.S. as the Republican president-elect has long signaled trade protectionist measures.
Those in the auto industry nearly appeared awe struck as earlier studies have said they will likely be among the biggest losers under a Trump administration.
A recent report from a private think tank, the Korea Economic Research Institute, even suggested the country's automobile industry may suffer a $13.3 billion cut in shipments to the U.S. over the next five years should Trump become the chief executive of the world's largest market.
South Korea's top automaker Hyundai Motor Co. and its smaller affiliate Kia Motors Corp. both have production facilities in the U.S. with a combined capacity of over 710,000 cars per year.
Donald Trump looks at an apartment model house during his visit to Seoul in May 1999. (Yonhap file photo)
Still, the U.S. remains a key destination for the country's auto exports, with a combined total of over 800,000 vehicles shipped there by the two South Korean automakers last year, according to company officials.
"A rise in trade protectionist measures will inevitably affect the country's automobile exports to the U.S. The only way for local manufacturers to sustain their U.S. sales will be to improve their products," an official from the Korea Automobile Manufacturers Association said.
Others argued South Korea's overall exports may benefit in the long-run from the change in the U.S. administration.
"Trump's economic policy is largely centered around tax cuts and increased fiscal spending," said LIG Investment & Securities analyst Kim Yu-gyeom, suggesting increased spending in the U.S. will likely lead to a rise in South Korean shipments of consumer goods.
The state-run Korea Trade-Investment Promotion Agency (KOTRA) too acknowledged the Trump administration may put some strains on trade between the two countries, but said it will also open new doors for many South Korean industries, including the construction and transportation sectors.
"Trump is very likely to demand a renegotiation of the Korea-U.S. FTA as he has continuously criticized the KORUS FTA," said Yoon Won-seok, head of KOTRA's information and trade support bureau. "However, the U.S. market for construction, communication, logistics and construction equipment will likely expand on Trump's social infrastructure projects."
The Federation of Korean Industries (FKI), South Korea's largest business lobby that represents the country's top 600 businesses, expressed hope the new U.S. administration will continue to strengthen the countries' bilateral relations.
"We hope the longstanding Korea-U.S. alliance will continue to remain strong, and the two countries will continue to work together closely under the leadership of the new U.S. president," an FKI official said.
"The South Korean business community will continue to do its utmost to help the two countries expand their political, social and economic cooperation," he added.