Korea-US Tariff Talks: Industry Remains Cautious... Semiconductors Say "Tariff Rates Need Watching" [Gyeongju APEC]

Includes Adjustment of Korea-US Profit-Sharing Ratio
Industry: "Agreement More Positive Than Expected"
However, Semiconductor Sector Remains Cautious
"Specific Tariff Rates Still Unclear"

With South Korea and the United States reaching a dramatic breakthrough in their trade and tariff negotiations, analysts believe that industries such as automobiles, shipbuilding, and semiconductors-which were hit hardest by tariffs-will now see some relief. However, there is a cautious sentiment within the industry, as stakeholders emphasize the need to wait for specific tariff rates to be announced, given that the agreement so far has only covered the broad framework.

Donald Trump, President of the United States, who visited South Korea to attend the 2025 Asia-Pacific Economic Cooperation (APEC) Summit, held his second summit meeting with President Lee Jaemyung on October 29. Following the summit, both countries announced in a joint briefing that they had reached an agreement on the details of the Korea-US tariff negotiations.

The agreement addressed the most challenging issue of the negotiations: of the $350 billion in investments pledged to the US, $200 billion will be invested in cash, but the annual limit will be capped at $20 billion. The so-called "Masga Project," involving $150 billion in shipbuilding cooperation, will be led by Korean companies and will include guarantees in addition to investments.

After the negotiations, the shipbuilding industry, which will participate in the Masga Project, is expected to benefit positively. According to the agreement, the investment will be split 50-50 between South Korea and the US until the principal is recovered. If it appears that South Korea will not be able to recover the full principal and interest within 20 years, the profit-sharing ratio can be adjusted. In previous US-Japan tariff agreements, the US claimed 90% of the profits, so the industry sees this outcome as more favorable than expected.

Additionally, the US has agreed to reduce tariffs on Korean automobiles from the current 25% to 15%, which is expected to reduce uncertainty for the industry. Furthermore, certain items such as pharmaceuticals and lumber will receive most-favored-nation (MFN) status, while aircraft parts, generic pharmaceuticals, and natural resources not produced in the US will be exempt from tariffs. For semiconductors, the agreed tariff rate will not be less favorable than that applied to Taiwan, South Korea’s main competitor.

Shin Wonkyu, Senior Research Fellow at the Korea Economic Research Institute, predicted that automobile tariffs would be reduced to below 15%, saying, "The industry will be relieved." He added, "For semiconductors, there was a possibility that a 100% tariff could be imposed, but since the rate will not be less favorable than that applied to Taiwan, some uncertainty has been resolved."

However, the semiconductor industry remains cautious. The prevailing opinion is that it is necessary to monitor the situation further until the specific tariff rates are announced.

In the early stages of the tariff negotiations, the semiconductor industry was promised MFN status, but the US later proposed a "100% tariff." Ultimately, the agreement included the condition that tariffs would not be less favorable than those applied to Taiwan, a major competitor. However, the exact tariff rate and the difference with Taiwan remain unclear.

An industry insider commented, "While some adjustments to export prices and cost structures will be inevitable due to the tariffs, the resolution of uncertainty has improved business predictability. It is positive that a balanced competitive environment with major rivals such as Taiwan has been established."

Another industry representative stated, "Once the detailed tariff rates and guidelines are finalized, companies will be able to adjust their strategies accordingly. Even as the US maintains its policy of encouraging domestic manufacturing, Korean companies still have ample capacity to expand production and investment."