NABO Industry Trends & Issues (Issue No. 74)

Published on February 25, 2025
Published by Industry & Energy Analysis Division

■ Industry Trends
   Amid escalating domestic and external uncertainties, the Korean economy is facing increased downward pressure due to weak domestic demand stemming from declining consumer sentiment and a sluggish construction sector. In addition, the country’s key industries have suffered a significant decline in exports.
   In December 2024, overall industrial production increased by 1.4% year-on-year (YoY), driven by a 5.5% YoY growth in the manufacturing sector. However, exports from Korea’s 13 major industries in January 2025 fell to USD 38.16 billion (-10.4% YoY), largely due to fewer working days during the prolonged Lunar New Year holidays and a slowdown in global import demand.
   Energy and crude oil prices in December declined by 4.5% and 3.1% YoY, respectively, due to rising U.S. crude oil production and inventory levels. While non-ferrous metal prices saw a 3.5% YoY uptick, iron ore and nickel prices sharply fell by 25.4% and 6.2% YoY, respectively, due to weakening demand from China’s steel industry and reduced U.S. government subsidies for electric vehicles. Agricultural commodity prices also dropped by 15.1% YoY, primarily due to declining global demand for rice.
   The December 2024 closing price of Korean Allowance Units (KAU24) stood at KRW 9,490, marking a 16.8% decline from the previous month, whereas trading volume surged 7.9-fold to 29.955 million tons over the same period. In the recyclable resource market, prices of post-consumer paper, plastic (excluding compressed PET), and glass bottles declined, whereas those of post-consumer tires and scrap metal increased compared to the previous month.
   In the housing market, the December 2024 home sales price index decreased by 0.07% month-on-month (MoM), whereas rental prices increased by 0.05% MoM. The commercial rental price index and rental rates declined in Q4, 2024, accompanied by rising vacancy rates.

■ Industry Issue: The Second Trump Administration’s Industrial Policy and Its Impact
   With the second Trump administration’s protectionist policies gradually taking shape, uncertainties facing the Korean economy are becoming increasingly pronounced. Against this backdrop, there is a growing consensus on the need for a coordinated response by the National Assembly, government agencies, and private enterprises to revitalize the domestic economy and boost corporate growth momentum. This report analyzes the evolution of U.S. industrial policies under Trump’s second term, assesses their potential economic impact on Korea, and explores strategic countermeasures.
    The second Trump administration has been advancing its “America First” agenda by expanding its domestic industrial infrastructure, a key election pledge. In an effort to reduce the United States’ chronic trade deficit, Washington has signaled plans to introduce reciprocal tariffs and impose sector-specific duties, potentially shifting away from the traditional multilateral trade framework. These additional tariffs and escalating sanctions against China are expected to weigh on Korea’s exports to the U.S., while also reducing the export of intermediate goods to third countries. The trajectory of U.S. tariff policy remains uncertain, adding to concerns about further economic instability. However, Korean enterprises have been diversifying their production bases, bolstering their resilience to external shocks. Given these circumstances, government support is critical for businesses to maintain the agility needed to navigate this period of uncertainty. To strengthen corporate fundamentals and resilience and enhance industrial competitiveness, it is essential to reassess supply chain strategies, examine trade agreement clauses related to potential U.S. reciprocal tariffs, and prepare countermeasures.