🚨 South Korea's US Import Market Ranking Drops
Today Korean Economic News for Beginners | 2025.10.10
0️⃣ Falls from 7th to 10th, Steel and Auto Exports Plummet Due to Tariff Shock
📌 Lowest Ranking in 37 Years…Losing Ground to Taiwan and Ireland
💬 South Korea recorded 10th place in the US import market based on January-July 2025 data, dropping to its lowest level since 1988. Previously maintaining 6th-7th place, South Korea fell behind Taiwan, Ireland, and Singapore as steel, automobile, and machinery exports sharply declined due to increased tariff burdens. While US imports increased 0.4% year-over-year, Korean products actually decreased 8.7%. Steel exports particularly plummeted by nearly half due to 25% tariffs, while automobiles and machinery also recorded double-digit declines. Industry experts worry that South Korea's position in the US market will shrink further if Korea-US tariff negotiations are delayed.
1️⃣ Easy Understanding
South Korea's ranking for exports to the United States has dropped significantly. In the past, the US bought a lot of Korean products, keeping us at 6th-7th place, but now we've fallen to 10th. The reason is that the US has imposed high taxes (tariffs) on Korean products, making them more expensive.
Let me explain why this matters. The United States is one of the world's largest consumer markets. Korean companies used to sell lots of cars, steel, and electronics there. When our ranking in the US drops, it means fewer people are buying Korean products and are buying more from other countries instead.
Let's look at what happened specifically. From January to July this year, the total amount of goods the US imported from around the world increased slightly (up 0.4%). But Korean products actually decreased by 8.7%. In simple terms, Americans are buying more foreign goods overall, but they're buying less from Korea.
Steel was hit the hardest. The US government imposed a high 25% tariff on Korean steel. For example, if Korea exports steel worth $100, it now has to sell for $125 in the US. Because prices became so high, American companies started buying from other countries instead of Korea. Steel exports actually fell by nearly half.
Cars and machinery are facing similar problems. As tariffs were imposed on Korean cars, their price competitiveness weakened, and exports declined by double digits. The situation is very different from when Hyundai and Kia cars sold well in the US.
So who took Korea's place? Countries like Taiwan, Ireland, and Singapore overtook Korea. These countries had relatively lower tariff burdens or had special trade agreements with the US that allowed them to export under favorable conditions.
The bigger problem is that this situation may continue. The Korean and US governments are negotiating to solve the tariff issue, but it's not being resolved easily. The longer negotiations take, the more damage Korean companies suffer, and once we lose a market, it becomes harder to get it back.
In the end, high tariffs weakened Korean products' price competitiveness, significantly shrinking our position in the US market.
2️⃣ Economic Terms
📕 Tariff
A tariff is a tax imposed on goods coming from foreign countries, used to protect domestic industries or as a trade policy tool.
- The higher the tariff rate, the more expensive imported goods become, making domestic products relatively more competitive.
- A 25% tariff means a product worth $100 must be sold for $125, greatly reducing price competitiveness.
- Tariffs are used as a major tool in trade disputes and can be lowered or exempted through negotiations.
📕 Import Market Share
Import market share is an indicator showing the proportion one country occupies in another country's total imports.
- Korea being 10th in the US import market means Korean products rank 10th in the proportion of total goods the US imports.
- A drop in ranking signals that the country is losing market position to products from other countries.
- Changes in major exporting countries' rankings have significant impacts on their economies.
📕 Protectionism
Protectionism is a policy of imposing high tariffs on imports or limiting import quantities to protect domestic industries.
- The goal is to help domestic companies gain an advantageous position in competition with foreign companies.
- While it can protect domestic industries in the short term, it can lead to trade wars in the long term, hurting all countries.
- If the other country imposes retaliatory tariffs, both countries' exports decrease, creating a vicious cycle.
📕 Price Competitiveness
Price competitiveness is the ability to supply products of similar quality at lower prices than competitors.
- When tariffs are imposed, final selling prices rise, weakening price competitiveness.
- Losing price competitiveness leads consumers to seek cheaper alternatives, reducing sales volume.
- Export companies make various efforts to maintain price competitiveness, including reducing production costs, developing technology, and negotiating.
3️⃣ Principles and Economic Outlook
✅ Direct Impact of Tariffs on Exports
Let's analyze specifically how tariff imposition weakened Korean products' price competitiveness.
First, the 25% tariff on steel dealt a fatal blow. Steel is a commodity product with fierce price competition, where a few percentage points of price difference determines whether orders succeed. With a 25% tariff, Korean steel becomes more than 20% more expensive than US-made or other countries' products of the same quality. US construction companies and manufacturers naturally look for cheaper alternative suppliers. In reality, US exports by Korean steel companies like POSCO and Hyundai Steel decreased by nearly half this year, with Brazilian and Japanese products taking their place.
Second, automobile tariffs are gradually taking effect. While Hyundai and Kia have factories in the US, so completed car exports were relatively less affected, parts exports were significantly impacted. As tariffs were imposed on engines, transmissions, and electronic parts made in Korea, local production costs increased. This led to weakened price competitiveness for Hyundai cars in the US market, resulting in a vicious cycle of decreased sales and reduced exports from Korean parts suppliers.
Third, decreased machinery exports mean shrinking position in the industrial equipment market. Korea has been recognized for its technology in machine tools, construction equipment, and industrial robots, but tariff burdens caused it to lose ground to German and Japanese products. Since these types of equipment are used for over 10 years once purchased, losing customers now has the same effect as giving up that market for the next 10 years. In the long term, this could lead to structural decline in market share beyond simple sales decreases.
Tariffs are not just temporary price increases but powerful policy tools that change market structure itself.
✅ Competitors Gaining Relative Advantage
Let's examine how other countries expanded their markets while Korea fell in rankings.
First, Taiwan made progress through semiconductor and electronic component exports. Taiwan has good relations with the US, and especially with TSMC (Taiwan Semiconductor Manufacturing Company) building large-scale factories in the US, it's recognized as a strategic partner. As the US checks China, it treats Taiwan as a "friendly nation," giving it a relatively advantageous position in terms of tariffs. With semiconductor demand exploding due to the AI boom, Taiwan's exports to the US increased by over 20%, becoming the decisive factor in overtaking Korea.
Second, Ireland showed strength in pharmaceuticals and medical devices. Ireland is an EU member country with low corporate taxes, where many multinational pharmaceutical companies have their European headquarters. As companies like Pfizer and Johnson & Johnson export products made in Ireland to the US, Ireland's exports to the US surged. This trend strengthened further as the pharmaceutical and biotech industries grew after COVID-19.
Third, Mexico and Canada enjoy tariff-free benefits thanks to USMCA (United States-Mexico-Canada Agreement). These countries have free trade agreements with the US, allowing them to export most products tariff-free. Mexico especially is rapidly emerging as an assembly base for automobiles and electronics, quickly eroding markets Korea previously occupied. While Hyundai is also expanding its Mexican factory as a workaround strategy, this leads to decreased exports from Korea itself.
Differences in tariff burdens are fundamentally changing competitive dynamics between countries, and it's very difficult to recover lost rankings.
✅ Importance and Challenges of Korea-US Tariff Negotiations
Let's analyze the issues and future outlook of ongoing Korea-US tariff negotiations.
First, the core of negotiations is the principle of 'reciprocity.' The US side argues that Korea should also lower tariffs it imposes on US products. For example, Korea imposes high tariffs on US agricultural products and automobiles, and the logic is that Korean products' tariffs cannot be lowered unless these are reduced. However, from Korea's perspective, there are many sensitive areas regarding agricultural sector opening, making concessions difficult. These differences in positions are causing prolonged negotiations.
Second, some items may receive strategic exceptions. High-tech industrial sectors like semiconductors and batteries are expected to receive tariff exemptions or reductions since the US also needs Korea's technology and supply. With Samsung Electronics and SK Hynix making large-scale US investments, there's room to negotiate tariff benefits conditional on such investments. However, negotiations will be more difficult for traditional industrial products like steel and general machinery.
Third, the longer negotiations are delayed, the more Korean companies' damages snowball. Once US buyers change suppliers, it's very difficult to switch back. Quality verification, supply contracts, and payment systems all need to be rebuilt, and relationships formed in this process don't break easily. Therefore, if negotiations are delayed by one or two years, markets lost during that time may be permanently lost. Industry experts worry that "if negotiations aren't concluded quickly, even maintaining 10th place will be difficult."
Korea-US tariff negotiations are not just about adjusting tax rates but a critical issue determining Korea's export structure to the US.
✅ Future Outlook and Response Strategies
Let's summarize strategies the Korean government and companies can take in this situation.
First, the government should focus on concluding negotiations quickly. Now is the time when just sitting at the negotiating table matters. Even if some concessions are necessary, priority should be given to lowering tariffs on key export items. Steel and auto parts especially are the foundation of Korean manufacturing, so tariff reductions in these areas should be the top negotiation goal. Simultaneously, in high-tech fields like semiconductors and batteries, there's a need to leverage America's strategic needs to draw favorable conditions.
Second, companies should strengthen export diversification strategies. Relying only on the US market is risky. Expanding exports to Europe, Southeast Asia, the Middle East, and South America can mitigate the US tariff shock. Some steel companies are actually strengthening their Southeast Asian market strategies, and the auto industry is also focusing on emerging markets like India and Brazil. This is the time for a strategy of not putting all eggs in one basket.
Third, local production investment should be considered. The surest way to avoid tariffs is to build factories in the US. Just as Hyundai reduced its tariff burden through US factories, other industries also need to increase local production. While high US labor costs and regulations are burdensome, this can guarantee stable market access in the long term. Battery companies expanding US factory construction is a good example.
To overcome tariff shocks, a three-part approach is needed: the government's swift negotiations, companies' market diversification, and expanded local production.
4️⃣ In Conclusion
South Korea's drop in US import market ranking is not just a statistical change but a case showing how tariff policies can fundamentally alter trade structures.
Falling to 10th place, the lowest in 37 years, is directly due to tariff burdens. The 25% tariff on steel especially completely neutralized Korean products' price competitiveness, with automobiles and machinery suffering similar blows. Meanwhile, countries like Taiwan, Ireland, and Mexico quickly took Korea's place based on relatively favorable trade conditions.
What's more concerning is that this may not be a temporary phenomenon. Once lost customers and markets are very difficult to regain. When US buyers find new suppliers and establish trading relationships, they don't easily return even if tariffs later decrease. Therefore, negotiation delays risk not just short-term losses but long-term changes in market structure.
The Korean government should make Korea-US tariff negotiations the top priority and proceed swiftly. Even if some concessions are necessary, focus should be on lowering tariffs on key export items. Steel and auto parts especially are the foundation of Korean manufacturing and must be protected.
Companies must also break away from structures dependent only on the US market. Exports should be diversified to Europe, Southeast Asia, and the Middle East, and if necessary, local production investment should be actively considered. Various strategies to circumvent tariff barriers need to be pursued simultaneously.
The trade environment is changing rapidly, and protectionism is strengthening. To survive in this environment, the government and companies must cooperate closely and respond quickly.
In the end, the current ranking drop is a warning signal. Without quick action, even maintaining 10th place may be difficult. Swift conclusion of Korea-US tariff negotiations along with fundamental reform of export structures is needed now.
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