NABO Industry Trends & Issues (Issue No. 76)

Published on June 24, 2025
Published by Industry & Energy Analysis Division

■ Industry Trends
    Recently, the Korean economy has experienced a slowdown in growth due to continued external uncertainties, a slump in the construction sector, and a delayed recovery in services, with a decrease in exports of certain items including automobiles.
    In April 2025, overall industrial production increased merely by 0.4% YoY, as a 5.2% increase in the manufacturing sector was offset with a 20.7% decrease in the construction sector. In May, exports of Korea's 13 major sectors fell by 1.8% YoY, driven by weak performance in petroleum (-20.9%), chemicals (-20.8%), secondary batteries (-18.4%), home appliances (-14.9%), and automobiles (-5.5%) despite growth in semiconductors (21.2%), biohealth (4.5%), and shipbuilding (4.3%).
   In April, oil prices decreased by 25.1% YoY, reflecting a decrease in global demand caused by an economic slowdown and expectations of OPEC+ output increase. Non-ferrous metal prices fell by 5.9% YoY, mainly due to demand concerns following the US government's reciprocal tariff announcement on April 2. Agricultural commodity prices dropped by 1.5% YoY, driven by a decrease in wheat and rice prices. Wheat prices fell by 8.3% YoY amid concerns over weak exports of US agricultural products after the US-China tariff announcement; rice prices plummeted by 29.9% YoY due to an increase in supply, influenced by the lifting of India's rice export ban and Thailand's rice harvest season, combined with weakening global demand.
   In April, the volume of Korean Allowance Units (KAU24) traded under the national emissions trading scheme fell by 26.9% MoM to 2.228 million tons. The closing price was KRW 8,790 per ton, down by 2.4% MoM. Prices of most recyclable materials decreased, except for scrap metals, plastic waste (i.e., compressed PET and PP pellets), and cardboard paper.

■ Industry Issues
US Tariff Policy and Korea's Industrial Exports: Assessing the Impact on Korea's Automobile Exports to the US
   Although Korea had benefited from tariff-free trade with the US under the Korea-US FTA, the recent changes in US tariff policy have led to new duties on certain products, steel and aluminum (May 23, 2025), automobiles (April 3), and auto parts (May 3). The US is a major export destination of Korea, with automobiles and auto parts accounting for 33.6% of Korea's total exports to the US in 2024. These developments have raised concerns about the potential negative impact on Korea's export performance.
   In light of these concerns, this paper quantifies the impact of US tariffs on Korea's automobiles and auto parts exports to the US using the gravity model. The analysis finds that the current 25% tariff on Korean automobiles and auto parts is expected to reduce their exports to the US by 7.8%.
   Considering such impact, the Korean government should closely monitor further tariff actions by the US while promoting high value-added exports to reduce the price elasticity of demand and mitigate uncertainties caused by tariff changes. In addition, it should fully leverage the existing trade agreements and consider support measures to proactively address industry risks.