The recent announcement from the U.S. government to impose tariffs of 25% on various steel and aluminum products has sent shockwaves through South Korea's automobile industry, particularly affecting smaller manufacturers of automobile components.
South Korea, known for its automobile giants like Hyundai and Kia, has seen many of its metal parts included on the tariff list, which will take effect on March 12, 2025. According to the Korea International Trade Association (KITA), this decision emerged from the U.S. government's proclamation on February 18, which outlined specific items subject to increased tariffs, including automobile air conditioners, motor parts, and various fasteners.
Lee Hang-gu, a research fellow at AINs, noted, “Smaller companies account for a large proportion of automobile part production, and they are contracted to produce orders from larger companies.” With these tariffs, the major concern is the potential for larger manufacturers to pass the increased costs onto their smaller partners, exacerbated by the latter's weaker bargaining power.
The tariffs could affect some $2.3 billion worth of exports to the U.S. last year, accounting for roughly 2% of South Korea's total export value to the country. Many of the components at stake are produced by companies closely partnered with the industry's leading firms, increasing vulnerability among smaller suppliers.
Despite the looming crisis, many of these smaller companies are at a disadvantage when itcomes_to tracking tariff developments and organizing responses, especially since there hasn't been much of a reaction from the South Korean government. Currently, the government's focus has been to implement export vouchers aimed at assisting small and medium-sized enterprises with the costs related to overseas marketing and consulting services.
Lee Taek-seong, chairperson of the Korea Auto Industries Cooperative Association, commented, “We’ve yet to prepare at the association less for any response or the impact on steel and aluminum derivative products.” This highlights the hesitancy and unpreparedness facing the sector amid unclear tariff policies.
On another front, the quality of life for South Koreans is plummeting, as recent reports reveal declining life satisfaction levels for the first time since 2019. KBS World Radio News reported South Korea's satisfaction score fell to 6.4 out of 10, down from 6.5 the prior year, marking the first decrease after years of gradual improvement post-COVID.
The country ranks poorly among OECD peers, sitting 33rd out of 38 nations, with high suicide rates peeking to 27.3 per 100,000 people— the highest observed rate within the past nine years. Statistics Korea indicated significant disparities based on income, where lower-income households, particularly those earning less than one million won per month, reported even lower satisfaction at 5.7 points.
This juxtaposition of economic challenges—triggered by external tariffs—and deteriorated life satisfaction paints a concerning picture for South Korea. Sociological experts suggest the effects of these tariffs, alongside rising suicides and descending happiness metrics, could deepen societal challenges as individuals confront high living costs and unstable job security.