As the US election draws closer, South Korean officials are strategizing to mitigate potential trade tensions with Donald Trump’s victory, Bloomberg reports.
Sources familiar with the matter reveal that the government is considering boosting energy imports from the US, anticipating increased pressure on trade partners from a second Trump term.
The primary concern lies in South Korea’s growing trade surplus with the US. If this becomes a point of contention for Trump, the South Korean government may urge its companies to increase purchases of US oil and gas.
This move echoes South Korea’s response to Trump’s first term, when they swiftly sought ways to enhance energy imports from the US. However, the situation is further complicated by geopolitical risks in the Middle East, potentially providing greater incentive for companies to shift towards US imports.
While South Korea’s trade ministry declined to comment on specific plans, SK Energy Co., the country’s largest oil refiner, is already diversifying its crude shipments due to Middle Eastern instability, with US and Canadian oil proving more profitable.
South Korea, heavily reliant on energy imports and home to a major refinery cluster, currently sources about 11% of its gas and 17% of its oil from the US.
Beyond energy, South Korea is also acutely aware of the potential for Trump to abandon trade and investment agreements, including those forged by President Yoon Suk Yeol and President Joe Biden. This would impact major South Korean corporations like Samsung and Hyundai, who have benefitted from US subsidies incentivizing reduced reliance on China.
Trump’s campaign rhetoric has also raised concerns about increased pressure on South Korea to shoulder more of the costs for hosting American troops.
Despite these anxieties, South Korean businesses have been actively increasing investment and hiring in the US in recent years, a point they aim to convey to US policymakers and Congress.
A Trump victory could potentially trigger significant economic ramifications for South Korea, with a study by the Korea Institute for International Economic Policy predicting a 0.67% contraction in its economy if Trump implements his proposed maximum universal tariffs. This would lead to a sharp decrease in exports, exacerbating the uncertainties already facing South Korea’s economy.
