Supporters react as Fox News projects Republican presidential nominee and former U.S. President Donald Trump as winner during the 2024 U.S. presidential election, in Palm Beach County Convention Center, in West Palm Beach, Fla., Wednesday (local time). Reuters-Yonhap

On Oct. 28, shares of the world's largest semiconductor foundry, TSMC, closed down 4.3 percent following then-presidential candidate Donald Trump's pledge to implement tariffs on chips from Taiwan instead of providing subsidies to the company.

Hours later, this also impacted Korea's SK hynix, whose stocks closed down 2.91 percent. The chipmaker had been experiencing a solid rally after reporting strong earnings for the third quarter of this year, but its momentum was halted due to concerns over potential tariffs.

Experts say this will likely be the case for many Korean businesses over the next four years. President-elect Trump's strategic decoupling from Beijing presents an opportunity for Korean chipmakers, carmakers, and other export-oriented businesses to capture market share from China. However, his plans to leverage economic pressure in trade negotiations are expected to place significant burdens on partner countries, including Seoul.

"Trump suggests the implementation of a baseline tariff of 10 percent on imports to the U.S, and warns of imposing a much stricter tariff of 60 percent on all Chinese goods," said Jang Sang-sik, head of trade trend analysis at the Korea International Trade Association (KITA).

A general view of the Samsung Austin Semiconductor plant in Taylor, Texas, April 16. The U.S. has awarded Samsung $6.4 billion to support the company's chip manufacturing plant in Taylor in an effort to help further generate domestic production of semiconductors, alongside expanding Samsung's manufacturing plants. AFP-Yonhap

Opportunities and challenges for chipmakers

For Korean chipmakers, Trump's second presidency brings considerable uncertainty, given his stance on the CHIPS Act and his strategic decoupling from China.

According to a report by the Korea Institute for Industrial Economics & Trade (KIET), Korean chipmakers can anticipate benefits in a second Trump administration, as Chinese competitors in key semiconductor and demand industries — such as smartphones and other IT devices — are likely to encounter stricter regulatory scrutiny.

"The CHIPS Act, which was designed by the (first) Trump administration, played a key role in slowing the progress of China's semiconductor industry and curbing the rise of major Chinese tech firms, effectively safeguarding the market share of leading chipmakers," the report said. "Although there are uncertainties surrounding incentives coming from the CHIPS Act, Korean companies can expect benefits due to the decline of Chinese players."

In 2019, Chinese smartphone maker Huawei delivered 241 million smartphones, but that number plummeted to 4.3 million in 2021 after Trump signed an executive order to block Chinese telecommunications companies and then-Secretary of Commerce Wilbur Ross placed Huawei on a blacklist in May 2019.

Then-U.S. President Donald Trump tours an Apple manufacturing plant in Austin with Apple CEO Tim Cook, Nov. 20, 2019. AP-Yonhap

Experts also noted that Trump's recent attacks on the CHIPS Act and threats to impose tariffs are viewed as election rhetoric, and the likelihood of the president-elect actually implementing tariffs at the expense of increased costs for U.S. device makers is slim.

"Trump's current policy promises regarding semiconductors will likely be adjusted," said Professor Lee Jong-hwan at Sangmyung University's Department of System Semiconductor Engineering. "If blanket tariffs are imposed recklessly, U.S. device makers will inevitably feel the impact as well. If this becomes excessive, there's always an option of passing over the increased cost to the U.S. market, given that the major manufacturers in both memory and non-memory sectors are located outside the U.S."

KITA's Jang also pointed out that imposing duties on chips would necessitate Washington's annulment of both the Korea-U.S. free trade agreement and the Information Technology Agreement, which ensure tariff-free trade for certain semiconductor-related items.

"Trump tends to use an anchoring effect in negotiations: if he wants to get 50, he'll start by asking for 100," Jang said. "If the final deal lands at around 50, the other party feels like they're getting a break, as if the president-elect has gone easy on them. While it might not be straightforward to impose tariffs directly on semiconductors, he could employ measures such as reducing subsidies for Samsung Electronics or TSMC or limiting investment incentives."

Construction is underway for Hyundai Motor's electric vehicle-only manufacturing facility in Georgia in this photo released by the state government of Georgia, Feb. 26. Yonhap

Setbacks on EV strategy, battery

The automobile and battery industries anticipate significant policy shifts under Trump's second term, especially given his threat to impose tariffs of up to 200 percent on vehicles imported from Mexico, with potential extensions to other imported vehicles.

Hyundai Motor and Kia have been addressing U.S. investment expectations through their manufacturing plants in Alabama and Georgia. However, a substantial share of their U.S.-sold vehicles is still imported from Korea. If high tariffs are imposed, they could face pressure to raise vehicle prices, potentially impacting their price competitiveness.

The KIET report noted that "risks are high for hefty tariffs on automobiles" and emphasized the need for "diplomatic efforts for Korea to align with other car-producing nations to resist these measures."

Another concern for carmakers is Trump's pessimism toward eco-friendly vehicles, likely leading to significant cuts in incentives currently offered to eco-friendly car and battery manufacturers.

Following the enactment of the Inflation Reduction Act (IRA), which offers incentives for U.S.-manufactured electric vehicle (EV) purchases, Korean carmakers and battery manufacturers have ramped up their EV-related investments in the U.S.

However, Trump has voiced plans to revoke IRA incentives, with his running mate, J.D. Vance, introducing a proposal to redirect EV credits toward gas-powered vehicles. While it is unlikely that Trump will fully eliminate the IRA, analysts suggest he may reduce EV credit amounts through executive orders.

This shift suggests that internal combustion engine (ICE) and hybrid vehicles could increasingly substitute EVs in the market. Consequently, carmakers may need to reallocate or repurpose investments in EV production facilities, while battery manufacturers might face an extended period of reduced demand for EV-related products.

"It is de facto impossible to retrieve trillions of won worth of investments that have already been made, so companies cannot help but leave open all the scenarios and constantly revise their strategies in order to receive more tax benefits and incentives even under a Trump presidency," Kim Moon-tae, head of the industry policy division at the Korea Chamber of Commerce and Industry, said.

Then-U.S. President Donald Trump speaks at the United States Steel Granite City Works plant in Granite City, Ill., July 26, 2018. AP-Yonhap

Rising pressure across industries

KIET anticipates that a second Trump presidency will put substantial pressure on the steel industry, with risks arising from potential tariff hikes. The administration is expected to uphold Section 232 of the Trade Expansion Act, which currently enforces a 25 percent baseline tariff on steel imports.

The defense industry is also expected to face downward pressure as Trump aims to create a U.S.-centric defense supply chain, leaving limited opportunities for Korean defense contractors looking to expand exports.

On the other hand, the Korea Atomic Industrial Forum (KAIF) anticipates that a second Trump presidency will expedite a return to fossil fuels, while also projecting growth in nuclear energy, particularly with the expected expansion of small modular reactors (SMRs).

"Trump is expected to reverse the Biden-Harris administration's energy policies by promoting fossil fuel and nuclear power expansion while reducing government support and incentives for renewable energy," Kang Goo-sang, head of KAIF's economic research institute, said. "Trump has consistently highlighted his goal of increasing energy production from domestic fossil fuels and expanding nuclear development. He asserts that this strategy would lower energy costs, create jobs, and stimulate economic growth."