Analysis: South Korea political turmoil pushes companies to take tariff matters into their own hands

LG Chem

25/02/2025 08:59

By Hyunjoo Jin
       SEOUL, Feb 25 (Reuters) - South Korea's business leaders
are taking action to offset the threat posed by U.S. President
Donald Trump's aggressive trade policies, hiring his former
aides and lobbying Republican states out of frustration with
delays by their own government which is mired in a political
crisis.
    Trump's sweeping and sometimes indiscriminate trade measures
have sparked existential debate in many international capitals
over how much they can depend on the U.S. from trade to
politics.
    While it remains to be seen how the upheaval may affect the
long-standing alliance and close economic relationship between
Washington and Seoul, the stakes are higher for South Korea than
other countries, as it grapples with the worst political crisis
in decades after impeached President Yoon Suk Yeol briefly
imposed martial law on December 3.
    Yoon's policy to grow more closely aligned with Washington
amid trade tensions between China and the U.S. has also
increased South Korea's reliance on the U.S. market, which
accounted fornearly 20% of its total exports last year, leaving
its businesses more vulnerable to potential tariff changes.
    "We are frustrated," an executive at a major business
conglomerate said, asking not to be identified due to the
sensitivity of the subject.
    The executive said the government has not discussed any
concrete plans to bring Trump to the negotiating table at
meetings it held with corporate representatives. 
    South Korean companies are also worried that they do not
have enough backing from the government, when leaders of other
countries including Japan and India have already met Trump and
seek to stave off damaging U.S. tariffs, company officials said.
    South Korea's Acting President Choi Sang-mok has yet to
speak directly with Trump, and told lawmakers earlier this month
that there are restrictions in the way the acting leadership can
respond to U.S. tariff system changes. He said Korea can
leverage its U.S. investments and energy imports in potential
negotiations. 
        South Korea's industry minister will 
    travel
     to the U.S. this week to press again for an exemption from
steel tariffs and discuss ways to boost cooperation in energy
and shipbuilding, the ministry said on Tuesday.
  
    Amid uncertainty over how quickly the domestic political
crisis would end, the country's business association sent a
delegation of executives from major companies such as Samsung,
LG, SK and Hyundai Motor to Washington last week and met U.S.
Secretary of Commerce Howard Lutnick, two sources familiar with
the matter said.
    At the meeting, Lutnick encouraged investment in the U.S.,
according to one of the sources. It was not immediately clear
what the Korean delegation team had requested.
    Companies are also arranging separate meetings to connect
with U.S. government officials.
    "We’re having dialogue with the new U.S. administration to
reinforce our significant investments, job creation and economic
impact," Jose Munoz, Hyundai Motor's former U.S. chief who was
promoted as the South Korean firm's first foreign CEO in
November, said in a letter to shareholders earlier this month.
    Hyundai also promoted Sung Kim, a former U.S. diplomat
during Trump's first term, to president in charge of global
government affairs in November.
    The company is looking to hold a car factory opening
ceremony in Georgia, three people familiar with the matter told
Reuters, with two of them saying the automaker is seeking to
invite Trump to the event.
    Autos, semiconductors and steel, which are being reviewed by
the Trump administration for import levies, are among South
Korea's major industries. 
    Hyundai said no decision has been made about the ceremony.
    The executive at a major business conglomerate said its
affiliates are also considering holding an outreach event in
Tennessee to tout their combined investments in the Republican
state as part of efforts to gain political influence at the
federal level.    
     
    IN A BIND
    Analysts expect a court decision to be made in March on
whether to oust Yoon or restore his presidential powers. If he's
removed from the office, an election to pick a new president
should be held within 60 days.
    In 2017, when Trump started his first term, then President
Park Geun-hye was going through an impeachment trial. 
    But the Trump administration moved more gradually with his
tariff policies, giving South Korea some time to maneuver, said
former trade minister Yeo Han-koo, helping it win an exemption
to steel tariffs in return for a quota that put a cap on export
volumes to the U.S.
    "Now they are moving at lightning speed," Yeo said.
    A Seoul government official said it is "having a lot of
difficulties," and there are concerns that the next president
may not follow through on commitments the current interim
government would make with the U.S., for example.
    Scott A. Snyder, president of the Korea Economic Institute
of America (KEI), a Washington-based think tank, said that a
major impediment is there is no leader-to-leader communication
between the two countries.
    "That is something that just has to wait," he said, adding
it would be better for Korea "to lie low and to avoid picking
its head up in many of these sectors."

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 (Reporting by Hyunjoo Jin, Cynthia Kim and Heekyong Yang and
Josh Smith; Editing by Miyoung Kim and Kim Coghill)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))