Biden Strengthens COVID-19 Response... Short-Term Impact on Korean Exports Unavoidable

TF Formation, Possible Lockdown Policy
Concerns Over Direct Impact on Consumer Goods Sector and Automobile Industry
Long-term Positive Outlook Also Expected

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] As U.S. President-elect Joe Biden is expected to strengthen measures against the novel coronavirus disease (COVID-19), there is an analysis that this could act as a negative factor for our export companies until the first quarter of next year.

Major export items such as automobiles and steel, as well as consumer goods sectors like textiles, are expected to be hit. Although Biden's election is positive for our exports in the mid to long term, in the short term, COVID-19-related risks may expand.

On the 9th, Kim Heungjong, president of the Korea Institute for International Economic Policy (KIEP), said in a phone interview with Asia Economy, "In the very short term, if Biden strongly responds to COVID-19 after taking office, the U.S. economic growth rate could decline until the first quarter of next year, and accordingly, our exports may decrease. In the past, when the U.S. economy worsened and exports declined, not only consumer goods and food and beverages but also major export items such as automobiles and steel often saw reduced export performance," he explained.

President-elect Biden has identified COVID-19 response and economic recovery as key tasks and is accelerating the formation of a transition team. Biden plans to announce a COVID-19 response task force co-led by Vivek Murthy, former U.S. Surgeon General, and David Kessler, former FDA commissioner. The situation in the U.S. is severe, with daily COVID-19 cases surpassing 100,000.

In this regard, if the quarantine situation does not improve by the inauguration day on January 20 next year, there is speculation that the U.S. may implement lockdown policies. In this case, the U.S. economic growth rate could decline until the first quarter of next year, negatively impacting our exports.

Professor Jung Ingyo of Inha University's Department of International Trade said, "If the COVID-19 problem worsens next year, the U.S. will inevitably impose lockdowns. Consumer goods sectors will be hit first, and in the case of automobiles, export performance decline and supply chain weakening will occur," he predicted.

However, in the long term, the launch of the Biden administration is widely expected to be positive for Korean exports. There are voices that Biden's national policy philosophy?such as the possibility of rejoining international agreements and organizations that the Trump administration withdrew from or sought to withdraw from, restoration of the multilateral trade system, and pursuing diplomatic pressure with allies rather than direct measures like imposing tariffs?will act as a boon for Korean exports in the long run.

According to KIEP, the Trump administration withdrew from the Trans-Pacific Partnership (TPP), the Paris Climate Agreement, the Iran Nuclear Deal, the UN Human Rights Council, UNESCO, the Intermediate-Range Nuclear Forces Treaty, and the Open Skies Treaty, and announced its intention to withdraw from the World Health Organization (WHO).

The most urgent issue faced by domestic export companies is the possibility of introducing a carbon-adjustment tax following re-entry into the Paris Climate Agreement. Accordingly, risk preparedness is needed for steel and petrochemical companies.

This content was produced with the assistance of AI translation services.