🚨 Home Appliance Export Crisis: US Tariffs and Housing Market Slowdown Double Blow

Today Korean Economic News | 2025.06.27

📌 First Half Appliance Exports Drop 8.3%…Steel Tariffs and Housing Slowdown Hit Hard

💬 South Korea's home appliance exports fell 8.3% in the first half of 2025 compared to the same period last year. The main reasons were US steel tariff increases and the US housing market slowdown. Exports of major white goods like refrigerators, washing machines, and dishwashers to the US dropped significantly. Industry experts worry that tariff uncertainty and global supply chain changes will continue in the second half. The government says it is working with companies to find solutions like export diversification and local production expansion.

1️⃣ Easy Explanation

South Korea's home appliance exports have dropped a lot, causing problems for related industries. The US is our biggest customer for home appliances, but several problems there have hurt our sales.

Let me explain what "appliance exports" means. It's when we sell home appliances like refrigerators, washing machines, air conditioners, and dishwashers made in Korea to other countries. This involves big companies like Samsung Electronics and LG Electronics, as well as many small parts suppliers. When exports drop, it affects jobs and the economy.

The 8.3% drop in appliance exports in the first half is quite large. This happened for two main reasons.

First is the US "steel tariff" problem. The US started charging high taxes (tariffs) on products that use steel. Since appliances like refrigerators and washing machines use a lot of steel, they were directly affected. When tariffs are added, our products become more expensive in the US, making them less competitive.

Second is the US housing market slowdown. High interest rates made it harder for Americans to buy houses. When people buy new homes, they usually also buy new refrigerators, washing machines, etc. But this demand dropped a lot.

How are our appliance companies responding? Big companies like Samsung and LG are building factories in the US or producing in Mexico to avoid tariffs. But small and medium-sized supplier companies can't afford such overseas investments, so they face bigger difficulties.

These problems are expected to continue, so our appliance industry needs to find new strategies at this important time.

2️⃣ Economic Terms

📕 Tariff

A tariff is a tax charged on goods coming from other countries.

• It's used to protect domestic industries or as a trade policy tool.
• When tariffs go up, imported goods become more expensive and less competitive.
• US steel tariffs directly affect our home appliances that use steel.

📕 White Goods

White goods are large home appliances that were traditionally made in white color.

• These include refrigerators, washing machines, dishwashers, and air conditioners.
• They are different from electronics like TVs and smartphones.
• They are often replaced when buying a new house, so they're closely related to the housing market.

📕 Local Production

Local production means building factories in the country where you want to sell products.

• It can save on tariffs and shipping costs.
• But it requires large initial investment and complex management.
• Big companies can do this, but it's hard for small companies.

📕 Supply Chain

A supply chain is the entire process from raw materials to final products.

• It's a network connecting parts suppliers, manufacturers, and distributors.
• Global supply chain reorganization means companies are changing their production locations.
• When supply chains change due to tariffs or political issues, it greatly affects related companies.

3️⃣ Analysis and Economic Outlook

✅ How US Tariff Policy Affects Korean Home Appliance Industry

• Let's analyze the specific impact of US steel tariff expansion on our appliance exports.

  • First, steel-intensive appliances are being directly hit. For refrigerators, about 30-40% of total manufacturing cost comes from steel materials, so steel tariffs directly reduce product competitiveness. Washing machines and dishwashers also depend heavily on steel, facing high tariff burdens. The 25% steel tariff imposed by the US increased the selling price of our appliances in the US by 5-7%. This put us at a disadvantage when competing with low-priced Chinese products. Actually, refrigerator exports to the US dropped 12.3% and washing machines dropped 15.7% in the first half.

  • Second, production base relocation to avoid tariffs is speeding up. Samsung Electronics is expanding washing machine and refrigerator production at its South Carolina plant, while LG Electronics is increasing washing machine production at its Tennessee plant. They're also using nearshoring strategies, producing in Mexico for export to the US. But this strategy is only possible for big companies. Small parts suppliers lack the resources for overseas investment and still have to export parts made in Korea. This is widening the gap between large and small companies.

  • Third, uncertainty in US tariff policy makes long-term planning difficult. The Trump administration's tariff policy is hard to predict, making it difficult for companies to make medium and long-term investment plans. Not knowing when or which products might face additional tariffs, companies have to be conservative in their management. This delays investment in new product development and facility expansion.

• US tariff policy is not just about cost increases but is a structural change factor that makes our appliance industry rethink its entire global strategy.

✅ US Housing Market Slowdown and Appliance Demand Decrease

• Let's deeply analyze how the US housing market slowdown affects our appliance exports.

  • First, reduced new home construction is the direct cause of appliance demand decline. With US interest rates at 5.25-5.5%, mortgage rates have risen to around 7%. This caused new housing starts to drop more than 20% compared to last year, and existing home sales also fell sharply. When people buy new homes, they usually also buy refrigerators, washing machines, dishwashers, etc., but this demand has dropped rapidly. Especially, the luxury housing market slowdown greatly reduced demand for premium appliances.

  • Second, replacement demand from existing homeowners is also shrinking. Due to high interest rates and economic uncertainty, American consumers are cutting unnecessary spending. Appliances are durable goods, so people often delay replacement unless they break down, which is exactly what's happening now. Many households replaced their appliances during the pandemic, so the natural replacement cycle is also being delayed. Replacement demand makes up over 70% of the US appliance market, so this decline greatly affects the entire market.

  • Third, the shrinking remodeling market is also reducing appliance demand. In the US, many people chose to remodel their existing homes instead of moving due to rising house prices, but economic slowdown has reduced this demand too. Remodeling often involves replacing appliances in kitchens and laundry rooms, so this market decline directly hits our appliance companies. Sales at major US home centers like Home Depot and Lowe's are also declining, showing overall housing-related consumption is shrinking.

• The US housing market slowdown is not just a cyclical phenomenon but a structural impact of high interest rates, and recovery is expected to take considerable time.

✅ Second Half Outlook and Industry Response Strategies

• Let's look at the second half appliance export outlook and the industry's strategic responses.

  • First, difficult export conditions are expected to continue in the second half. US tariff policy is unlikely to change quickly, and housing market recovery will only be possible when interest rate cuts become full-scale. The Fed is being cautious about rate cuts this year, so housing market recovery is expected only after next year. Also, Europe and China's economies are unstable, making it hard to find alternative markets. The industry expects second half appliance exports to show similar weakness to the first half.

  • Second, export market diversification and local production expansion are key response strategies. Large companies are already increasing local production in the US and Mexico, and expanding into emerging markets like Southeast Asia and India. India is particularly attracting attention as appliance demand is growing rapidly with economic growth and middle class expansion. Samsung Electronics is increasing refrigerator and washing machine production in India, while LG Electronics is also considering local production expansion. However, small companies find it hard to implement such strategies and need government support.

  • Third, technology innovation and premium product development are becoming important. To maintain competitiveness even under tariffs or economic slowdown, differentiation based on technological superiority is needed. Companies are focusing on developing products that can create new demand, such as smart appliances with AI functions, eco-friendly products with high energy efficiency, and compact urban appliances. They're also expanding into B2B markets, as commercial appliances for hotels and commercial facilities are relatively stable and profitable.

• To overcome the appliance industry crisis, short-term responses and long-term competitiveness enhancement strategies must be pursued in balance.

4️⃣ Conclusion

The 8.3% drop in appliance exports in the first half is a symbolic event showing the complex crisis facing our appliance industry. Under the double burden of US tariff policy and housing market slowdown, the industry stands at a crossroads where it must fundamentally review its business strategies.

The most urgent task is reducing dependence on the US market. Our appliance industry has relied heavily on the large and stable US market, but this crisis has revealed the limits of such a strategy. We need to expand into emerging markets like India, Southeast Asia, and the Middle East, while also increasing market share in existing developed markets like Europe and Japan.

Local production expansion has also become an inevitable choice. While large companies are already increasing production in the US and Mexico, we need policies to support overseas expansion of the entire ecosystem, including small supplier companies. The government should build comprehensive support systems including overseas expansion funding, local information provision, and workforce training.

Differentiation through technology innovation is also important. Competitiveness that doesn't waver against external shocks like tariffs or economic fluctuations ultimately comes from technology. We must focus more on developing next-generation appliances incorporating AI, IoT, and eco-friendly technologies.

Although the second half outlook isn't bright, we should use this crisis as an opportunity for our appliance industry to build a stronger and more diversified business structure. If the government, large companies, and small companies work together to wisely overcome this difficult time, we can secure even stronger competitiveness in the global appliance market.

Crisis is also opportunity. We hope the Korean appliance industry can take another leap forward using current difficulties as stepping stones.