With a Trump presidential election victory on November 5, Korea’s geopolitical and geoeconomical uncertainties as well as concerns are on the rise. To address this, a Korean economic organization and an American think tank have held a joint conference help navigate Korea’s path through turbulent times.

  In-Kyo Cheong, Minister for Trade of the Republic of Korea of the Ministry of Trade, Industry and Energy remarked in his congratulatory remarks that, “The government will spare no effort in supporting deeper engagement of private-sector economic cooperation between Korean and U.S. businesses” 

PIIE President Adam Posen: “China and Mexico are the key targets for U.S. tariff policies... For other countries, there is high likelihood that tariffs would be a bargaining chip in negotiations”

  President Adam Posen of the PIIE forecasted that the U.S. economy would grow by 2.0% next yearand left headroom for even higher growth. President Posen attributed his forecast for a solid U.S. economic growth to improvements in U.S. labor productivity from technological advancements, including in AI. He also foretold that there may be a risk of inflation and of benchmark interest rate hikes in 2H 2025. 

  Also, President Posen emphasized distinguishing those Trump campaign pledges that are threats from those which will be implemented. He observed that hardline immigration policies would be implemented immediately after Trump takes office and that hardline tariff policies would mainly target China and Mexico. He added that tariff policies for other countries, however, would very likely be utilized as a bargaining chip during negotiations.

  On the Korean economy, President Posen said that, “Generally, U.S. economic growth is a positive factor for the Korean economy,” and he stressed, “During Trump 2.0, Korea needs to employ a strategy of entering ‘Fortress America,’ which would involve expanding direct investments to and strengthening economic cooperation with the U.S.” He also recommended that Korea diversity its markets to outside the U.S. and China.

Jeffrey Schott: “Korea should propose a ‘Korean Offer,’ a list of cooperation items with the U.S. that would be a Win-Win”

Korea Economic Research Institute: “Imposition of universal baseline tariffs may lead to Korea’s exports to the U.S. shrinking by as much as 15.8 billion dollars (approximately 22 trillion won)”

  Jeffrey Schott, senior fellow of PIIE, opened Session 1 of the conference with a presentation titled, “Assessing Policy Shifts In Trump 2.0: Implications for U.S.-Korea Economic Relations.” During his remarks, he stated, “U.S. tariff policies will not distinguish between allied countries and those who are not,” and he observed that, “Despite the KORUS FTA, the new tariffs may affect Korea.” He recommended that it would help if there was a ‘Korean Offer,’ a list of win-win industrial cooperation opportunities where U.S. interests align with Korea’s—including in automobiles, semiconductors, defense, and shipbuilding industries. Schott also emphasized that Korea should play a leadership role in maintaining the rules-based trading system by joining the CPTPP and advancing cooperation with ASEAN and the EU.

  The second speaker of Session 1 was Taekyu Lee, principal research fellow of the Korea Economic Research Institute (affiliated with FKI, hereinafter, “KERI”). Lee forecasted that in the event universal baseline tariffs are imposed by the Trump administration, Korea’s exports to the U.S. may shrink by as much as 15.8 billion dollars (13.6%). However, tariff effects will differ significantly by industry as the tariff elasticity of U.S. import demand varies across industries and sectors. For instance, exports in the shipbuilding, plastics, and nuclear power industries were not projected to decrease, even if tariffs were imposed. Lee recommended that, “Korea-U.S. cooperation should be strengthened where Korea has a competitive advantage, including in the defense, shipbuilding, and nuclear power industries, as it would be a challenge for the U.S. to realign their supply chains. Meanwhile, individual industries will need to establish bespoke supply chain strategies.”

  Joining the Session 1 panel discussion, Tae Soo Kang, visiting research fellow of KERI (and Professor at KAIST), forecasted that long-term interest rates would rise due to mounting fiscal deficits after the launch of the second Trump administration. He indicated that this would make it difficult for the Bank of Korea to cut benchmark interest rates. During the panel discussion, Han-koo Yeo, senior fellow at PIIE (Former minister for trade of the Republic of Korea), added, “Although we expect various challenges during the second Trump administration, Korean businesses may have an opportunity to leap ahead by making improvements to economic fundamentals, including making structural changes toward a ‘Dual-track System for Exports and Investment.’

The U.S.-China conflict and formation of international economic blocs will become the New Normal; Korea needs an economic security strategy as a measure against potential formation of economic blocs, rising security costs, and tariff wars

  The first speaker of Session 2 was Cullen Hendrix, senior fellow of PIIE. In his presentation titled, “Geopolitical Realignment under Trump 2.0,” Hendrix forecast that the second Trump administration’s foreign affairs and national security strategy spells both crisis and opportunity for Korea. Risk factors include potential defense spending increases, including a higher Korean burden in the burden sharing for maintaining U.S.  forces in Korea. However, there is potential opportunity for the Korean defense industry as demand for weapons in NATO and the Middle East increases.

  Martin Chorzempa, senior fellow of PIIE, forecast that U.S. exports and technology controls against China would cast a shadow over Korean companies in China, including those in the semiconductor industry.  

  Wonho Yeon, head of the Global Economic Security Group at the Hyundai Motor Group diagnosed that the economic strategies of the U.S. and China are likely to intensify, leading to a reorganization of the global economy structured around trust and shared values. The U.S. has chosen to de-couple from China and the E.U. is de-risking from China, but there are few strategic options for Korea. Yeon recommended that Korea’s economic and national security strategy should include a government-led and strong industrial policy drive as well as strengthening partnerships with like-minded countries.

  In the Session 2 panel discussion, Hye Min Lee, advisor at Law Firm Kim & Chang and Jeong-Meen Suh, President of the Korea Security Agency of Trade and Industry cautioned that escalating policy clashes between the U.S. and China may lead to a tariff war that runs broader and more intense than in the past.

FKI: “We will continue to provide direction and insight for the Korean economy amid uncertainties in the external landscape”

  This event was the first conference jointly hosted by FKI and PIIE. The two institutions have committed to holding annual conferences going forward. 

  Chul Chung, FKI CRO and president of KERI remarked, “The FKI will expand its cooperation with think tanks with global renown such as PIIE,” adding, “We will continue to provide direction and insight for the Korean economy amid uncertainties in the external landscape.”