Japan and South Korea Prepare for Economic Impact of US Metal Tariffs

Japan Manufacturing

Japan Takes a Cautious Approach, While South Korea Moves Quickly to Shield Its Automotive Industry

The imposition of US tariffs on metal products has left Japanese and South Korean industries scrambling to mitigate potential damages. Following US President Donald Trump's announcement of sweeping tariffs, Japan’s metal firms are proceeding with caution. Tokyo is currently working on a strategy to strike a middle ground while preparing for any potential long-term effects. South Korea, on the other hand, has moved quickly to put measures in place to support its automotive industry, which stands to be significantly impacted by the tariffs.

Japan's Response to US Tariffs

In 2024, Japanese exports of machinery and electrical equipment to the US amounted to ¥7.8 trillion ($53 billion), reflecting a 5.3% increase from the previous year. Despite this growth, Japan's metal industry is not experiencing significant immediate impact from the new 24% tariffs imposed on steel and automobile products. However, companies are still closely monitoring the situation to understand the full extent of the potential damages. While some industry leaders remain uncertain, one Tokyo-based battery material producer noted that no damage had been reported yet from clients. Still, Japanese authorities are wary of long-term effects, especially in sectors like electronics and automotive, which would face major setbacks should the tariffs persist.

The Japanese government is refraining from retaliatory measures as negotiations with the US government continue. Japan hopes to reach an agreement that could either reduce the tariffs or potentially exempt the country from them entirely. On April 8, Japan’s Ministry of Trade and Industry (METI) will hold a ministerial meeting to discuss comprehensive measures in response to the tariffs.

South Korea Takes Swift Action to Support Its Economy

South Korea, with a more direct approach, is preparing to unveil measures aimed at mitigating the negative effects on its automotive sector. In 2024, South Korea exported $127.8 billion in goods to the US, including nearly $34.7 billion worth of passenger automobiles, $7 billion in auto parts, and nearly $3 billion in lithium-ion batteries. With such significant exports to the US, the potential impact of these tariffs could be severe.

The South Korean government, led by acting president Han Duck-soo, has vowed to work with the private sector to minimize damage. The government is planning follow-up measures to protect vulnerable sectors, such as small-medium enterprises and mid-sized companies. However, the country’s political instability, with the impeachment of former president Yoon Suk Yeol, may delay the response. South Korea’s aluminium sector is also on high alert, with companies looking to devise strategies to weather the storm.

Additionally, South Korean tech giant LG Electronics has warned that any further escalation in tariffs could have a pronounced impact on its operations, especially if the US introduces import quotas or safeguard measures. The company’s major production sites are spread across South Korea, China, Mexico, and Vietnam. LG's CFO, Changtae Kim, emphasized that higher tariffs would directly affect the company’s competitive position.

Looking Ahead

Both Japan and South Korea face uncertain futures as they navigate the complex landscape of US tariffs. Japan remains cautious, hoping for negotiations to alleviate the pressure, while South Korea moves swiftly to protect key sectors like automotive manufacturing. The coming weeks will be crucial in determining how both nations adapt to the evolving trade situation and whether their efforts to shield their industries from the tariffs will be successful.