TAIPEI (Taiwan News) — South Korea proposed legislation on Monday (Nov. 11) for a chips act that includes subsidies for chipmakers in an attempt to combat the economic risks posed by Donald Trump’s presidency.
South Korea is bracing for significant economic impacts from Trump’s return, including the threat of high tariffs on Chinese imports, per Reuters. South Korean President Yoon Suk-yeol warned the measures could prompt Chinese competitors to cut export prices and undercut Korean chip firms overseas.
Trump threatened a universal 10% tariff on imports and 60% on Chinese goods, which would lower demand for electronics products using chips. According to South Korean Finance Minister Choi Sang-mok, "Should the policy stance that has been stressed by president-elect Trump become realized, the impact on our economy is expected to be significant.”
In addition, Trump has threatened to scrap the CHIPS Act, which grants subsidies for Asian chipmakers like Samsung and TSMC to build plants in the US. Instead, Trump said he would rely on tariffs to make companies produce semiconductors domestically.
The semiconductor industry is critical to South Korea's economy, as chips accounted for 16% of exports last year. As a result, South Korea’s chipmakers must prepare for growing competition from Taiwan and China.
Shares in South Korea’s Samsung Electronics on Wednesday (Nov. 13) dropped to their lowest level in more than four years over concerns about the impact of US tariffs. Trump's tariffs on Chinese imports are affecting Samsung, which relies more heavily on Chinese buyers than SK Hynix.
The ruling party’s bill is meant to assist local companies combat challenges amid a US-China chip war, as China, Japan, Taiwan, and the US grant subsidies to manufacturers. The bill also allows certain R&D employees can work longer hours, bypassing the legal 52 maximum hours per week.
It is uncertain whether the legislation will be approved by the liberal opposition party, which holds a parliamentary majority. Samsung's labor union opposed the bill, saying the company was blaming the law for its "management failure.”
According to Kim Young-gui, an economist at the Korea Institute for International Economic Policy (KIEP), South Korea could be forced to renegotiate its bilateral free trade agreement, but it would probably suffer less than China, Mexico, and the EU. A KIEP report said that if Trump goes through with tariffs, South Korea's exports could fall US$44.8 billion over several years, shrinking its economy by 0.67%.
