By Yi Whan-wooKorea is beginning to face a worrisome prospect as its growing trade surplus with the United States could potentially lead to trade disputes between the two allies, according to analysts, Sunday. This concern is heightened by the possibility of former U.S. President Donald Trump's return to office.
An advocate of protectionism, Trump pointed the finger at Korea and other major trading partners for persistent trade deficits suffered by the U.S. during his presidency from 2017 to 2021.
He apparently remains unchanged in his view and this is apparent on his official campaign website.
Trump claims the Korea-U.S. free trade agreement (KORUS FTA) that took effect in 2012 was “one-sided” and that he renegotiated it when he was president.
“Under the circumstances, Korea has more reasons to dread when it comes to bilateral trade relations if Trump is re-elected,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute.
He noted that Korea's trade balance with the U.S. reached a surplus of $44.5 billion in 2023. It was the first time in 21 years that the U.S. topped the list of countries where Korea has a trade surplus. The surplus was $28 billion in 2022 and $22.6 billion in 2021.
While Korea’s overall trade balance remained in the red at $9.97 billion, it marked a modest decline compared to 2022’s record shortfall of $47.78 billion.
In contrast, the U.S.' trade deficit hit a record of nearly $1 trillion in 2022.
That prompted Trump to hold incumbent U.S. President Joe Biden accountable, and, as a possible breakthrough, propose a 10 percent tariff on all imported goods estimated to be worth $3 trillion annually.
The proposed rate will be up from about 3 percent on average, and mainly targets China in the middle of a heightened trade war with the U.S.
“But Korea also can fall under Trump’s microscope and be forced to cooperate to reduce the U.S. trade deficit,” said Cho Young-moo, a researcher at LG Economic Research Institute, pointing out that Trump was against Korea taking a larger share of the U.S. auto market.
According to data from the Korea Automobile & Mobility Association, Korea exported 1.17 million automobiles to the U.S. from January to November of 2023.
The figure already surpassed the previous annual export record of 1.06 million vehicles set in 2015.
Joo Won, deputy director of the Hyundai Research Institute, said, “Korea may need to keep a low profile concerning trade to avoid drawing unwanted attention from Trump.”
Experts also assessed that along with trade, Korea’s ongoing U.S. investments under the Inflation Reduction Act (IRA) can be hindered if Trump returns to the presidency.
Trump has been skeptical of Biden's signature climate law aimed at offering $369 billion in tax breaks and subsidies for businesses investing in clean energy.
The participating companies from the Korean side include LG Energy Solution and SK Innovation — both battery manufacturers — and Hyundai Motor that is accelerating the transition to electric vehicles.