If the United States imposes new tariffs under Section 301 of its trade law, South Korea's key industries, including petrochemicals, are expected to suffer significant blows to their exports. With the supply of naphtha, a key raw material, already unstable, the addition of tariff barriers could lead to inevitable export disruptions.
According to relevant government agencies on July 22, the proposed tariff rate on South Korean products is set at 12.5% due to insufficient measures against forced labor imports. This rate is 2.5 percentage points higher than the existing global tariff rate of 10%. There is also a possibility that the rate could increase further if South Korea is designated as an overproduction country.
The petrochemical sector is expected to be hit hardest by the tariff increase. South Korea primarily exports benzene, toluene, and mixed xylene to the U.S. In fact, during the first half of this year, exports of benzene and toluene to the U.S. surged by 128% and 150%, respectively, reaching $10.48 million and $10.3 million compared to the same period last year.
However, as tariffs loom, industry concerns are deepening. Most export items are generic products that are difficult to differentiate, making it nearly impossible to pass the increased tariff costs onto local selling prices in the U.S. Additionally, there are discussions about Taiwan potentially benefiting from a lower tariff rate of 10%, and the U.S. Trade Representative (USTR) has officially pointed out South Korea's overproduction issues in the petrochemical sector, adding to the negative outlook.
The plastics industry is also bracing for the impact of tariffs. Despite an unstable supply of raw materials, exports of various plastic products, including mats and films, reached $970 million in the first half of the year, showing resilience. However, the outlook for the second half remains uncertain. The high proportion of small and medium-sized enterprises in the sector, coupled with insufficient local investment capacity to avoid tariffs, is seen as a major vulnerability.
Exports of key consumer goods, such as cosmetics and K-Food, are also at risk. These products are particularly sensitive to price fluctuations. In the first half of this year, exports of cosmetics and K-Food to the U.S. increased by 40% and 8%, respectively, totaling $1.44 billion and $1.23 billion compared to the previous year, but it is uncertain whether this upward trend can continue in the second half.
The rapidly changing U.S. tariff policies have also left the home appliances, electronics, and machinery sectors on edge. The U.S. imposes item-specific tariffs on products that include steel and aluminum, but these tariffs are frequently altered without consistent principles. The shift from a content-based tariff assessment to a differential method has heightened uncertainty in the industry.
If U.S. tariff pressures materialize, small and medium-sized enterprises, which struggle to invest locally, are expected to bear the brunt of the impact. This contrasts with large corporations that have been able to circumvent tariffs by increasing local investments with substantial capital. Small businesses, facing high interest rates that complicate funding, are now confronted with additional risks.
The trade industry is calling for the government to actively engage in trade diplomacy to minimize the impact of tariff increases. A trade industry official stated, "The U.S. administration appears to be using the Section 301 investigation as leverage to raise mutual tariffs to previous levels. While it may not be possible to completely avoid tariffs, urgent diplomatic efforts are needed to secure conditions that are not disadvantageous compared to major competitors like Japan and Taiwan."
* This article has been translated by AI.
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