Trump's tariff threat puts Korean chip industry at risk

The Korean semiconductor industry faces uncertainty after US President Donald Trump announced potential tariffs on semiconductors and pharmaceuticals.

In a letter to South Korean President Lee Jae Myung, Trump proposed a 25% tariff on all Korean imports starting August 1 and urged Korean companies to expand production in the US through expedited regulatory approvals.

US Commerce Secretary Howard Lutnick confirmed that investigations under Section 232 of the Trade Expansion Act will conclude by the end of July.

If implemented, the tariffs could reduce annual sales for Korean semiconductor firms by about 4.3%.

Samsung Electronics’ Device Solutions division may lose 4.78 trillion won (US$3.5 billion) from its 111.1 trillion won (US$80.7 billion) in 2023 sales, while SK hynix could face a 2.85 trillion won (US$2.1 billion) hit.

Experts warn of broader impacts on global supply chains and added pressure on Korean firms to increase their US presence.

Still, the industry remains cautious, waiting for more details before taking action.

🔗 Source: The Korea Times

🧠 Food for thought

1️⃣ Semiconductor tariffs historically harm both sides of trade disputes

Previous semiconductor trade disputes show tariffs often create lose-lose scenarios rather than achieving their intended protectionist goals.

The 1986 U.S.-Japan Semiconductor Agreement, which limited Japanese chip exports to protect American manufacturers, ultimately backfired by raising prices for U.S. computer manufacturers who reported paying 30-40% more for Japanese chips compared to European competitors 1.

This price disparity damaged the competitiveness of American technology companies dependent on affordable components, demonstrating how tariff-driven price increases ripple through supply chains.

Economic analyses of the current situation suggest a 25% semiconductor tariff could decrease U.S. GDP growth by 0.18% in the first year and lead to a cumulative $1.4 trillion loss over ten years, while simultaneously harming Korean chip exports 2.

The interconnected nature of the semiconductor ecosystem means that disrupting any part of the supply chain through tariffs creates pain points throughout the industry, affecting innovation cycles and end-product affordability across multiple markets.