Implications of the Second Trade War for Various Industries < Video < Article

※ This content was broadcast on the 'Economy ON' program of Yonhap News TV on Tuesday, February 4th at 4 PM. (Featuring: Seo Young-tae, Yonhap Infomax reporter, Hosted by: Lee Min-jae)

[Anchor Lee Min-jae]

Is there a possibility that President Trump's trade regulation policy, which has deferred tariffs on Canada and Mexico, will be further strengthened in the future?

[Reporter Seo Young-tae]

That's correct. The trade regulations of the Trump administration's second term are more concerning going forward. President Trump has already stated that he could impose new tariffs on the European Union, and the possibility that South Korea could be next in line cannot be ruled out.

[Anchor]

Can we predict the impact of this trade regulation through past examples?

[Reporter]

Fortunately, countries have learned many lessons from observing the U.S.-China trade dispute in 2018. Trade disputes lead to unfavorable results in all export-related sectors, leading to reduced trade, decreased production of export products, and declining performance of related companies. These results can be immediately reflected in the stock prices of listed companies.

[Anchor]

Then, what impact will this have on major industries in South Korea?

[Reporter]

Yes, a good analysis report came out today from Korea Investment & Securities. It's titled 'The Second Trade War: Implications for Korean Industries'.

In Korea, industries with high export ratios such as automobiles and IT could be hit. The sluggishness in these sectors may continue until tariff issues are officially brought to the negotiation table. On the other hand, industries like shipbuilding, which the U.S. needs but finds difficult to produce domestically, have low tariff risks.

[Anchor]

What should investors focus on?

[Reporter]

Since tariffs are ultimately an export-related issue, it's also a good strategy to pay attention to domestic consumption-related stocks. In particular, Korea Investment & Securities advises focusing on financial stocks such as banks and insurance, as well as the food and beverage sector, which have become more attractive in terms of valuation.

[Anchor]

Let's look at it by industry. Is there a growing possibility that Korean automakers and parts suppliers will face difficulties due to the imposition of universal tariffs by the U.S.?

[Reporter]

That's right. The risk faced by Korean automakers and parts suppliers is the imposition of universal tariffs on Korean (10%) and Mexican (25%) products. Korean auto companies have no manufacturing facilities in Canada, so there's no impact from Canadian tariffs.

[Anchor]

What's the sales structure of Hyundai and Kia in the U.S. market?

[Reporter]

Hyundai's annual U.S. sales are about 900,000 units, of which 350,000 are produced locally in the U.S. The remaining 550,000 are mostly imported from Korea. For Kia, annual U.S. sales are about 800,000 units, with 350,000 produced locally and 450,000 imported. Notably, of Kia's imported vehicles, 300,000 are from Korea and about 150,000 are from Mexico.

[Anchor]

If tariffs are imposed, how will it affect Hyundai and Kia's performance?

[Reporter]

According to Korea Investment & Securities, for Hyundai, assuming a 10% tariff is imposed on the 550,000 units currently exported to the U.S., the impact on operating profit would be about 1.9 trillion won, which is 14% of the 2025 estimate.

For Kia, if a 10% tariff is imposed on Korean vehicles and 25% on Mexican vehicles, the impact is expected to reach about 2 trillion won. This is about 16% of the 2025 estimate.

[Anchor]

Is there a possibility that this U.S. tariff measure will also affect the memory semiconductor industry?

[Reporter]

Yes, that's correct. Memory semiconductors have already experienced tariffs on Chinese products during Trump's first administration. Since then, Korean companies have established a system where semiconductors produced in Chinese factories are consumed as much as possible within China, and products for U.S. export are produced in Korean factories.

[Anchor]

Is there a possibility that Korean companies will be placed in a more disadvantageous situation compared to U.S. companies?

[Reporter]

Most U.S. companies also produce memory semiconductors overseas, not in the U.S. Therefore, Korean companies are not necessarily at a greater disadvantage than U.S. companies in terms of tariffs. However, demand for IT hardware sets is likely to slow down due to tariff impositions.

[Anchor]

What impact will this have on the IT hardware industry?

[Reporter]

The operating profit margins of consumer-oriented IT hardware companies like PC and smartphone manufacturers are typically only in the mid to high single digits. Therefore, if tariffs are imposed, they will have to pass this on to the selling price, which is likely to lead to an increase in consumer prices. This could result in reduced consumption. If set demand slows down, the semiconductor industry will inevitably be affected as well.

[Anchor]

Yes, while the U.S. high-tariff policy is spreading to major trading partners, the shipbuilding industry, a major export sector, is in an exceptional situation, right?

[Reporter]

The shipbuilding industry is essentially in a wind-free zone, free from the U.S. high-tariff policy. This is because the U.S. does not import ships. The ships mentioned here include not only commercial vessels but also military vessels, which are defense materials, and their regular repair and maintenance (MRO). The U.S. legally requires all merchant ships traveling along its coasts and naval ships and patrol boats operating worldwide to be built in domestic shipyards.

[Anchor]

Yes, there are many opinions that the U.S. high-tariff policy is negative for the cyclical transportation industry, but it could be an opportunity for top companies, right?

[Reporter]

That's correct. Generally, strengthened protectionism is likely to have a negative impact on the transportation industry due to reduced trade volume. However, since the pandemic, supply bottlenecks have persisted in container shipping, air cargo, and third-party logistics. In this environment, top companies may have the opportunity to increase freight rates. During the initial transition period of tariff policies, logistics stability may be shaken, potentially leading to increased freight rates. At this time, top companies with logistics infrastructure and service competitiveness can secure supplier dominance in this environment, according to Korea Investment & Securities.

[Anchor]

Are there any domestic transportation companies in an advantageous position?

[Reporter]

Hyundai Glovis and Korean Air were mentioned. Hyundai Glovis, as an affiliate of the Hyundai Motor Group, is supported by stable captive demand (affiliate volume), while Korean Air has structurally strengthened its bargaining power by securing an oligopolistic market position through the acquisition of Asiana Airlines.

[Anchor]

Which domestic industries are expected to benefit from the tariff war?

[Reporter]

First, cosmetics are expected to benefit. According to Korea Investment & Securities, as of November 2024, Korea ranks first in the share of cosmetics imported by the U.S., accounting for 23.4%. This is followed by France (16.0%) and Canada (13.3%).

If the U.S. imposes tariffs on Canadian cosmetics, their prices will rise, making Korean cosmetics more competitive in the same market.

If additional tariffs are imposed on European Union (EU) countries, it could create an even more favorable environment for the Korean cosmetics industry. If tariffs are imposed on French products, the price competitiveness of Korean cosmetics in the U.S. is likely to strengthen further.

In the food and beverage sector, CJ CheilJedang is also expected to benefit. The main competitors for large amino acid products produced by CJ CheilJedang's bio business division are Chinese companies. Currently, large Chinese amino acid companies are pursuing sales strategies based on low-cost production and price competitiveness, leveraging their domestic production facilities.

If the Trump administration imposes high tariffs on Chinese large amino acid products, Chinese companies' price competitiveness is likely to weaken. In this case, CJ CheilJedang, which has production facilities in the U.S., is likely to receive indirect benefits.

(Yonhap Infomax Financial Department Reporter Seo Young-tae)

※This content is from the video news covered in the Yonhap News TV's Investigation File corner.

ytseo@yna.co.kr

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Young Tae Seo ytseo@yna.co.kr