Uncertainty Over U.S. Auto Tariffs Resolved... Will the $700 Billion Export Target Gain Momentum?

Recently, with the announcement of the "Joint Fact Sheet" summarizing the results of tariff negotiations between South Korea and the United States, the export uncertainties for Korea's two major sectors-automobiles and semiconductors-have been resolved. For automobiles, retroactive application is possible as early as November 1, 2025, and semiconductors will be granted Most Favored Nation (MFN) status. This development is expected to give momentum to the government's annual export target of 700 billion dollars for this year.

According to the Ministry of Trade, Industry and Energy on November 17, the cumulative export value from January to October this year reached 579.3 billion dollars, a 2.3% increase compared to the same period last year (566.1 billion dollars).

Export vehicles are waiting to be loaded at Pyeongtaek Port in Gyeonggi Province. Photo by Kang Jin-hyung

This leaves 120.7 billion dollars to achieve the government's annual export target of 700 billion dollars. To meet this goal, monthly exports in both November and December need to exceed 60 billion dollars. The average monthly export value from January to October was 57.93 billion dollars, meaning that an additional 2.5 billion dollars per month is necessary to reach 700 billion dollars. In comparison, last year’s exports for November and December were 56.3 billion dollars and 61.4 billion dollars, respectively, totaling 117.7 billion dollars. Therefore, if exports in November and December this year surpass last year's by 3 billion dollars, the 700 billion dollar target will be achieved.

On November 14, Minister of Trade, Industry and Energy Kim Jeonggwan and U.S. Secretary of Commerce Howard Lutnick signed the "Memorandum of Understanding on Korea-U.S. Strategic Investment." This marks the conclusion of the Korea-U.S. tariff negotiations, which began with a broad agreement during the first round of talks at the end of July, roughly three and a half months ago. Although the MOU does not specify the exact timing of the automobile tariff reduction, it is expected that the tariff will be retroactively reduced from the current 25% to 15% starting November 1.

This Korea-U.S. agreement is expected to have a positive impact on Korean exports. Kang Insu, a professor of economics at Sookmyung Women's University, stated, "Although the U.S. automobile tariff, which had been set at 0% under the Korea-U.S. Free Trade Agreement (FTA), will now be reduced from 25% to 15%, this removes lingering uncertainties. With Korea now facing the same tariff rates as competitors from the European Union and Japan in the U.S. market, this will have a positive effect on Korean automobile exports."

In reality, exports to the U.S. have struggled under tariff pressure from President Donald Trump. From January to October this year, exports to the U.S. amounted to 100.183 billion dollars, a 5.1% decrease compared to the same period last year (105.506 billion dollars). In particular, from April-when the U.S. automobile tariff took effect-through August, automobile exports to the U.S. declined by 17.4%. With the conclusion of this tariff negotiation, exports of automobiles and other goods to the U.S. are expected to recover.

The entry of semiconductors, which have been driving Korea's export growth, into a "supercycle" (period of exceptional growth) is also brightening Korea's export outlook. Additionally, the U.S. has promised to grant MFN status to Korean semiconductors, ensuring treatment no less favorable than that given to competitors such as Taiwan, which is expected to have a positive effect. According to the Ministry of Trade, Industry and Energy, semiconductor exports in October this year reached 15.73 billion dollars, a 25.4% increase from the same period last year. Strong demand for high-capacity, high-value memory has led to rising fixed prices for memory chips, resulting in eight consecutive months of growth and the highest October performance on record. This upward trend continued into November, with exports increasing by 17.7% from November 1 to 10.

The government believes that the results of this Korea-U.S. agreement will have a positive impact on Korean exports, but remains cautious about achieving the 700 billion dollar export target this year. A Ministry of Trade, Industry and Energy official said, "In the long run, the 15% automobile tariff will have a positive impact on Korean exports, but so far, Korean companies have absorbed the cost without raising prices, so it remains to be seen whether this will immediately translate into increased export value. Ultimately, the key will be how strongly the robust semiconductor export performance, which has been driving Korea's export growth, continues, and how much other sectors recover. We will do our utmost to maintain the overall export growth trend."