South Korea's auto parts exports to the US hit a new high. Can South Korea's industry reap the benefits of the Sino-US game?

The Korea Automobile Industry Association analyzed the statistics of the Korea Trade Association and released the results on the 23rd, showing that South Korea's exports of auto parts to the United States last year reached US$8.222 billion, a record high. Since 2021, South Korea's exports of auto parts to the United States have steadily increased from US$6.912 billion to US$8.03 billion in 2022, and further increased to US$8.087 billion in 2023, showing a year-on-year upward trend.

In the overall export market of auto parts, the United States occupies the largest proportion. Last year, the total export value of South Korea's auto parts was US$22.547 billion, of which exports to the United States accounted for as high as 36.5%, becoming the core market of South Korea's automobile industry. Next in order are the European Union (17.3%, $3.89 billion), Mexico (9.5%, $2.153 billion), China (6.4%, $1.454 billion), ASEAN (5.8%, $1.301 billion), India (4.1%, $921 million) and other countries and regions.

In terms of vehicle exports, South Korea's annual exports last year were $70.789 billion, of which exports to the United States were $34.744 billion, accounting for nearly half (49.1%). Therefore, automobile-related companies, including parts, have expressed strong concerns about the 25% tariff policy announced by the Trump administration. Given that each car requires about 30,000 parts and the industry supply chain is complex and intertwined, it is difficult to accurately predict the specific impact of the tariff policy. However, people in the parts industry generally believe that due to the close connection between auto parts and complete vehicles, the increase in tariffs will inevitably have a direct or indirect impact on the entire Korean automotive industry. If complete vehicle companies increase local production, the sales of Korean parts companies will naturally decrease; and if Korean parts companies want to enter overseas markets, investment costs will also increase.

In addition, general tariffs and reciprocal tariffs are also key factors in reducing the price competitiveness of Korean parts companies. In particular, if the 25% additional tariff on Mexico, which was postponed for one month, becomes a reality, it will directly hit Korean parts companies entering Mexico. Industry insiders expressed deep concern: "If the United States requires automakers to not only increase local production but also increase the localization rate of parts, the Korean parts industry will face great difficulties."

However, some analysts believe that as the Sino-US trade conflict intensifies, Korean auto parts may become a substitute for Chinese auto parts. Kim Kyung-you, a senior research fellow at the Korea Institute for Industrial Research, predicted in the report "The Impact of the US Election on the Korean Automotive Industry" that although major countries including South Korea may increase tariffs, if the tariffs on China are more severe, especially the 60% unified tariff on auto parts, the US import chain will be replaced by Korean parts, bringing reflexive benefits to South Korea.

At the same time, Shin Won-kyu, a research fellow at the Korea Economic Research Institute, pointed out in "Trump's Tariff Policy Outlook and Strategic Response Plan" that South Korea and the United States have a complementary relationship in terms of auto parts. The results of the study show that the more auto parts Korea exports to the United States, the more people employed in the U.S. auto manufacturing industry. Therefore, in order to ensure its own interests and clarify its position, Korea should maintain an appropriate distance from China.