Korea faces challenges to navigate Trump’s tariff risk without president

Citizens take to the street in Seoul, Friday, as they wait for the Constitutional Court's ruling on the impeachment of President Yoon Suk Yeol. Korea Times photo by Choi Won-suk

Korea is likely to continue to grapple with mounting trade challenges, as the removal of President Yoon Suk Yeol from his office makes it harder for the country to swiftly navigate lingering tariff pressure from the United States, experts and industry officials said Friday.

The embattled president was ousted from his post after the Constitutional Court upheld his impeachment, nearly four months after he was suspended from his duties on Dec. 14 last year for his martial law declaration.

The power vacuum has stoked concerns across the business circle here, as evidenced by what is widely seen as the government's "disappointing" countermeasures against the U.S. tariffs.

The government has failed to defend major export-reliant conglomerates here from U.S. President Donald Trump’s imposition of a 25-percent "reciprocal" tariff on Korea.

Korea must hold a presidential election within 60 days of the Constitutional Court's verdict, leaving the country vulnerable to additional trade threats from the U.S. in the absence of a state leader, even though Prime Minister Han Duck-soo remains in the acting president role.

Experts and industry officials said one of the biggest risks the business circle faces now is the trade threat from the world’s largest economy.

“It will be tough for Korea to promptly respond to any such external risks due to the continuous leadership vacuum,” said Choi June-sun, professor emeritus of law at Sungkyunkwan University.

However, the latest decision by the court also comes with an upside because the country has cleared away prevailing political uncertainties, the professor said.

“Acting President Han will have to handle lingering trade risks from the U.S. until the next presidential election,” he said. “Rival parties need to support him to normalize state affairs and help Korea minimize external shocks under the ongoing state leadership vacuum.”

Acting President Han Duck-soo, fourth from left, poses with business leaders at his residence in Seoul, Tuesday. From left are Finance Minister Choi Sang-mok, Hyundai Motor Group Executive Chair Chung Euisun, Samsung Electronics Executive Chairman Lee Jae-yong, Han, SK Group Chairman Chey Tae-won and LG Group Chairman Koo Kwang-mo. Yonhap

Officials from conglomerates and key export players called for earlier normalization of the government by electing the next president.

“The government and companies should work as a team to counter the escalating trade pressure from the U.S.,” an official from a major conglomerate said on condition of anonymity.

“Even if relevant government authorities in charge of the affairs take action, this is not enough. Any forms of talks between leaders of the two countries are crucial to alleviate mounting fears of tariffs from the business town.”

On top of that, some companies have had to delay their major investment decisions here and abroad due to the leadership vacuum, according to the official.

“Big companies want to win as many incentives as possible from foreign authorities when they make investments there,” the official said. “The role of the government is very important in the process. Most conglomerates will remain conservative in key decision-making in areas such as M&As and overseas investment until the next administration grips power."

According to a recent report by the Korea Institute for Industrial Economics & Trade, Korea’s exports to the U.S. are feared to fall up to 13.1 percent annually upon the imposition of the reciprocal tariff.