Companies' Proactive Investment in the U.S.... Expectation Rises for Positive Impact from Tax Rate Decision

Hyundai Motor Group and Korean Air have consecutively unveiled large-scale "gift packages" following the re-election of U.S. President Donald Trump, drawing attention to whether these moves can help ease the Trump administration's trade pressures. These investments, which directly respond to Trump's core policy pillars of the "American Manufacturing Renaissance" and "Buy America," are expected to significantly influence future tariff rate decisions applied to Korean companies.

Hyundai Motor Group's investment plan, worth $21 billion (approximately 31 trillion KRW), includes expanding finished vehicle production, establishing an electric furnace for automotive steel sheets at Hyundai Steel, and cooperating on next-generation nuclear technology such as small modular reactors (SMR). This is seen as a tailored composition targeting key industries emphasized by President Trump, including automobiles, steel, and energy.

Hyundai's investment is particularly noteworthy as the first large-scale U.S. investment by a Korean company since the start of Trump's second term. Given that President Trump holds direct decision-making authority over major trade policies, analysts suggest that Hyundai has positively shifted his perception. This has raised expectations that President Trump might exclude Korea from some tariff targets or at least impose lower tariffs compared to other countries.

Following this, Korean Air announced plans to purchase $32.7 billion (approximately 48 trillion KRW) worth of U.S.-made passenger aircraft and engines. The signing ceremony for the tripartite cooperation agreement with Boeing and GE Aerospace was attended in person by U.S. Secretary of Commerce Wilbur Ross. It is highly unusual for a key figure leading protectionist policies to participate in a foreign company's purchasing event. This has been interpreted as Korean Air's strong commitment to buying American products making a favorable impression on the Trump administration.

These large-scale investments and purchases could also impact the reciprocal tariff policies the U.S. is pursuing. If the reciprocal tariffs scheduled for the 2nd of next month are implemented, the U.S. plans to impose differentiated tariffs on major trading partners by comprehensively considering trade deficit levels, non-tariff barriers, tax, and exchange rate policies. Korea is currently the 9th largest U.S. trade deficit country, and it is widely believed that it will be difficult for Korea to avoid being listed among the "Dirty 15."

However, since Korea is proactively aligning with U.S. interests, there is a possibility of securing relatively favorable tariff rates compared to major competitors. For example, if Korea faces a 10% reciprocal tariff plus a uniform 15% tariff on automobiles, the total tariff would be 25%, whereas if the European Union (EU) faces a 20% reciprocal tariff, European vehicles would be subject to a 35% tariff, giving Korean products a price competitiveness advantage.

Additionally, there are expectations that the Trump administration may introduce separate "universal tariffs" on specific items such as automobiles and semiconductors, similar to steel. This is because applying tariffs uniformly is considered more practical than granting exceptions to specific countries. The Korean government is currently focusing its negotiating power on minimizing tariff rates compared to the EU, Japan, and others. Active cooperation from private companies is supporting these efforts.

Despite intense tariff pressures, there is cautious optimism that the customized "gifts" offered by Korean companies could help partially ease the Trump administration's trade policies. Kang Seok-gu, head of the Korea Chamber of Commerce and Industry's research division, said, "Ultimately, companies are finding ways to survive," adding, "In the midst of the U.S.-China hegemony war, it is already difficult to return to the past, and now it is a process of adapting to a new international economic order."