Peter S. Kim, managing director and head of Global Business Group at KB Securities, speaks during a Jan. 8 roundtable held by The Korea Times on Trump 2.0's impact on Korean economy and its financial market, in Seoul. Korea Times photo by Shim Hyun-chul

U.S. President-elect Donald Trump will be inaugurated as the 47th president of the United States on Monday. Entering the White House for the second time, Trump is threatening to impose a universal tariff on all imported goods, including a 60 percent tariff against China. His America First policy initiatives and unpredictability have left many economies preparing for and bracing for the shocks.

The Korea Times hosted a roundtable with financial and economic experts on Jan. 8 to assess Trump's impact on Korea in 2025. One of Korea's visible weaknesses, the depreciating Korean won, was discussed in relation to the strong dollar. Roundtable participants remained cautiously alert about the semiconductor and auto sectors, while noting that the shipbuilding, energy, and financial sectors would benefit from the Trump presidency. They also recommended expediting the full implementation of the Corporate Value-up Program. To spur growth, the panelists agreed that the Korean government should employ a mix of fiscal and monetary policies this year.

The panel was composed of Peter S. Kim, managing director and head of Global Business Group at KB Securities; Park Chong-hoon, head of research for Korea Financial Markets at Standard Chartered Bank Korea; and Joo Won, deputy director of economic research at the Hyundai Research Institute. The Korea Times' Chief Editorial Writer Shim Jae-yun moderated the discussion.

Q: Trump has pledged high tariffs, 60 percent for China and blanket 10 to 20 percent universal tariffs. What will the consequences be, how will it affect Korea and what should our response be?

Peter S. Kim: There are a lot of concerns and uncertainties around Trump's first few months. We should remind our investors that his second term is likely to be quite different. He is going to be much more aggressive during the early part of his second term. On tariffs, I think Trump 2.0 will be aggressive in the early days, strategically focused on certain countries and products. The inflation from his tariffs will take at least a year or two before it gets translated into consumer price index data. The first six to 12 months will lead to volatility, but the equity market, particularly the U.S. equity market, will be fairly constructive.

Park Chong-hoon, head of research for Korea Financial Markets at Standard Chartered Bank Korea, speaks during a Jan. 8 roundtable held by The Korea Times on Trump 2.0's impact on Korean economy and its financial market, in Seoul. Korea Times photo by Shim Hyun-chul

Park Chong-hoon: Trump will be more prepared and take action faster in his second term. There, however, will be both risk and opportunity depending on what agreement we have with the U.S. China will be severely affected, and if we face similar situations as China, we will look for ways to cooperate, such as through foreign trade agreements between China, Korea and Japan.

Joo Won: There will be three types of tariffs. First is the tariff on China, tariffs on specific products and universal tariffs. China will be heavily impacted, but because Korea's exports to China are less than what it was during the first Trump administration, Korea may be less impacted. By industry, the Korean auto industry should brace for some impact. Our institute's estimate is that if Trump's tariff policies take effect this year, Korea will suffer a trade reduction of $14 billion to $19 billion annually, and economic growth may be reduced in the 0.4 to 0.7 percentage point range.

Joo Won, deputy director of the Economic Research Department at Hyundai Research Institute, speaks during a Jan. 8 roundtable held by The Korea Times on Trump 2.0's impact on Korean economy and its financial market, in Seoul. Korea Times photo by Shim Hyun-chul

Q: Given the recent political turmoil in the nation, what do you foresee regarding its impact on the financial market and domestic instability coinciding with the Trump risk? What impact will it have on the foreign exchange market?

Kim: The Korean won shed 3 percentage points against the Australian and the Canadian dollars. It can be ascribed to the recent political turmoil, but it's more about the strong dollar. The 3 percentage point depreciation of the won against the two currencies is fairly modest, and therefore I remain bearish on the Korean won for the mid- to long-term.Our long-term export prospects, anchored by the semiconductor sector, are now clouded by the sector having missed out on AI chips and facing intensified competition from China and Japan. The key macro question from investors is, 'How do you generate growth for seemingly declining exports and a fast-shrinking population?'

Park: The impact of political turmoil, even during former President Park Geun-hye's impeachment, would last about a quarter. If the government can adopt the right policies and the central bank goes dovish, then the risk for the Korean economy may not be as severe as we think. However, the fast speed of the Korean won's depreciation is undoubtedly due to political turbulence, which conversely means that once that situation stabilizes, the Korean won will also stabilize.

Joo: In 2016, the Korean won depreciated for about a month and then stabilized when President Park Geun-hye was impeached by the National Assembly. While I expect the Korean won will not hover over 1,500 won, the foreign exchange rate will remain volatile until the first quarter or into the early second quarter of the year and then stabilize, although it may not appreciate much. The real risk may be that if the Chinese yuan suddenly depreciates, we may see the possibility of the Korean won shooting through the 1,500-won level.

Q: With record exports of $127 billion to the U.S. and a trade surplus of $55.7, does Korea's export report for 2024 render it vulnerable to U.S. retaliation?

Kim: As someone who monitors equity markets, I find that trade balance and export figures are lagging. On the other hand, the Korean equities market reflects the forward-looking outlook, which is negative. The trade volume is healthy, but profitability is tough to achieve. The Korean export market's shift to the U.S. from China is also at the expense of Korean companies' profitability. As for trade policy in Trump 2.0, I would say "Every country is for itself." In the first six months, the U.S. will target bigger markets such as China, Mexico and certain European countries. The next six months will be very important for Korea. This year, the first six months will be critical, as cyclically we are going into decline and domestic turmoil.

Park: During the first Trump administration, Japan achieved good relations with the U.S. based on ties between Trump and then-Japanese Prime Minister Shinzo Abe, but Japan also suffered because of its high current account surplus against the U.S. Such is case now with Korea to the extent that where officials are talking of importing fuel from the U.S. We may well be asked to make foreign direct investments in the U.S.

Joo: Except for the semiconductor sector, Korea did not perform well in exports in 2024. Korea ranks eighth in terms of nations the U.S. has a trade deficit with, while China, Mexico and Vietnam rank No.1, 2 and 3. The U.S. may not have much incentive to settle an imbalance with the country ranked eighth in terms of trade deficit. I expect it would target China, but a real warning signal for Korea would be when the U.S. begins targeting Vietnam, where many Korean companies are operating. Then, Korea may well be pressured strongly to directly invest in the United States.

Panelists and hosts of the Jan. 8 roundtable hosted by The Korea Times on "Challenges from Trump 2.0 and Korea's response: Implications on economy and financial markets" pose at the start of the discussions in Seoul. From left are Kim Ji-soo, editorial writer of The Korea Times; Joo Won, deputy director of the Economic Research Department at Hyundai Research Institute; Park Chong-hoon, head of research for Korea Financial Markets at Standard Chartered Bank Korea; Peter S. Kim, managing director and head of Global Business Group at KB Securities; and Shim Jae-yun, chief editorial writer for The Korea Times. Korea Times photo by Shim Hyun-chul

Q: On Trump 2.0, what policies will be advantageous or disadvantageous for specific industries? If the Korean market remains attractive, which sector should be highlighted?

Kim: There is a strong consensus that the energy sector will benefit from Trump's second presidency. The financial sector is even better. Thus, there may be a potential bubble, and the same logic can be extended to the cryptocurrency market. As for South Korea, it should watch how long Elon Musk can maintain his relationship with Trump, as Musk is a person who can save the EV industry, in which Korea heavily invested.

Park: We also agree the financial market will do well, as there were some "shy Trump" voters in the industry. Trump is seeking to build more ships so Korea's shipbuilding industry prospects look good as well as that of the defense industry. While Elon Musk can be a strong advocate for the EV sector, it remains to be seen how long his relationship with Trump will go.

Joo: Symbolic manufacturing sectors such as the steel and the auto industries, which Trump sees as crucial, may face severe impact. Despite Trump's support for the fossil fuel energy sector, renewables could be a surprise winner and AI. We remain skeptical about the prospects for Korea's petroleum and defense companies.

Kim: We should highlight Korea's financials. The financial industry is very connected and global. It highlights the importance of the Korean equity market, with the undervaluation of its equities and that of its banks, some of the most undervalued in the world. The current government's Corporate Value-up Program is crucial as Korea suffers from undervaluation of its equities. It allows Korean investors to seek equities of Korean banks more as deregulation efforts from the U.S. create a more favorable global financial market.

Q: What is the outlook for Korea's overall stock and crypto markets?

Kim: Deregulation will be a big theme. Cryptocurrency advocates have been named to head the U.S. SEC. We are seeing the early to middle part of the financial bubble. I would be worried when the exuberance draws retail investors to the financial market and the bubble bursts.

Park: In 2022, we forecasted bitcoin, at that time priced at $25,000, would reach $100,000 in late 2024. For 2025, we forecast it to reach $200,000. The key issue will be one of security, though, eventually.

Joo: As part of a research institute, we do not generally forecast stock markets. My sense is that investors would be looking more at the long-term performance prospects of firms rather than political uncertainties. Our institute forecast that the Korean economy would grow about 1.7 percent this year, but the recent political crisis has not been factored into that figure. Regarding the crypto market, I would compare it to the gold market in that people are less trusting of the U.S. dollar because of the Fed's fluctuating steps.

Q: What is needed to haul Korea's growth in 2025? What is the biggest risk from foreign investors' perspective?

Joo: As low growth is a given variable, the government needs to adopt appropriate fiscal and monetary policies. We also need a massive supplementary budget. Because of the uncertain political calendar ahead, the timing for the supplementary budget could be crucial. Korea should also lower its interest rates. Investors will also be watching tax policy changes, particularly corporate tax-related ones. With tariffs, it is important to keep in mind that Korea has both a bilateral free trade agreement and a military alliance with the U.S.

Park: I agree fiscal and monetary policies are important, and the supplementary budget is needed, and the earlier, the better, as domestic demand for goods and investments are low and the export outlook is not so great. The Korean won's volatility is also something Korea should closely monitor.

Kim: The dominant question from my investors before the political incident was about the birthrate and demographic change. There is not much we can do about this as it is a long-term issue, but more immediately, Korea should maintain the commitment to its Corporate Value-up Program and improve its corporate governance, including changes in commercial laws that would compel fiduciary duties to the board of directors of a company.