President Trump's massive additional tariffs... Industries most likely to have their credit ratings lowered - South Korean report

The imposition of additional tariffs by U.S. President Donald Trump has caused tensions to rise among South Korean companies, especially in industries that are simultaneously subject to product-specific tariffs and reciprocal tariffs, such as steel, semiconductors, and automobiles.
There are concerns that the credit rating of the United States may be lowered. The Trump administration is scheduled to announce reciprocal tariffs on a global scale starting on the 2nd of next month (local time).
An additional 25% tariff is expected to be imposed on certain industries. South Korea is 90% dependent on foreign trade. During President Trump's first term, trade revenues with the United States fell due to the strengthening of U.S. trade regulations.
If the Trump administration goes ahead with the imposition of significant tariffs, it is likely that South Korea's major export industries will be adversely affected.
On his first day in office, President Trump signed an executive order imposing a 25% tariff on imports from Canada and Mexico, but later gave the tariffs a one-month reprieve.
This is expected to be the first case of a domestic company with a large presence in the country being affected by the Trump administration's tariffs. According to the Korea CXO Institute, which specializes in corporate analysis,
Of these, 25 groups were found to have established local subsidiaries in a total of 201 locations (110 in Canada and 91 in Mexico). By group, Samsung (68 locations, 50 in Canada and 91 in Mexico)
The United States, Mexico (18 locations), Hyundai Motor Group (28 locations), Canada (12 locations), and Mexico (16 locations) were found to have the most overseas subsidiaries.
"The tariff measures by President Trump are not simply for negotiation purposes, but are policies that are likely to be implemented," said Kim Ki-myung, a researcher at Korea Investment and Securities.
Taking all of this into consideration, it is inevitable that domestic companies will bear an increased burden," he said, adding, "It is inevitable that companies with local production in Mexico and Canada will be significantly affected."
He added that "the impact on the steel, automobile and semiconductor industries, which are burdened by the 'reciprocal tariffs', could be significant," and that "in terms of credit ratings, the tariffs imposed by President Trump are basically
"In industries that are heavily affected by the pandemic, credit ratings may be lowered, but this will be differentiated for each company depending on the characteristics of each industry and the degree of financial stability of each individual company," he added.
Regarding the steel industry, the rating agency Standard & Poor's (S&P) was the first to voice concerns. Domestic steelmakers have previously enjoyed tariff exemptions within certain quotas.
However, if the measure is ended, Korean companies will likely become less competitive compared to rival companies that did not benefit from the tariff exemption.
In fact, S&P has issued credit ratings for POSCO Holdings, POSCO, and POSCO International.
The outlook for the steel industry has been revised down to "negative," reflecting chronic oversupply in the steel industry, losses in its electric vehicle battery business, and rising debt.
The weak outlook for imports and market demand is also a negative factor for the credit ratings. S&P said, "If the tariffs are implemented, they will have a negative impact on POSCO and Hyundai Steel."
"Although the proportion of exports to the United States by these companies is only a few percent, this is expected because the selling prices and profit margins of these exports are higher than those of other regions," he said.
In the case of the semiconductor industry, most of the production bases are located outside the United States, and they are exposed to significant tariff risks. If the tariff measures against SK Hynix continue for a long time, prices will
There are concerns that the company's competitiveness may be weakened, although a substantial downgrade of its credit rating is considered unlikely.
Korea Credit Rating said, "(SK Hynix) does not have a manufacturing base in the United States.
"Even if the risk of tariffs becomes a reality, most of the memory semiconductors in the industry are manufactured outside the United States," he said.
The company said, "The impact on business competitiveness is expected to be small, given that the products are produced in China and the extent of the decline in price competitiveness is small, and the impact on the credit rating will be limited."
Finally, within the automotive industry, it is analyzed that auto parts manufacturers will be more affected by the imposition of tariffs than auto manufacturers.
Hyundai and Kia Motors have maintained excellent profit generation capabilities. Meanwhile, domestic auto parts manufacturers continue to have low operating profit margins of less than 5 percent, and the tariffs have
Korea Credit Rating said, "Currently, for the third quarter of 2024, companies that are dependent on domestic parts manufacturers in Mexico and Canada, where tariffs of 25 percent are expected to be imposed, will be
The company said, "The cumulative sales amount for the three quarters is about 6 trillion won (about 598 billion yen), which is 6.5 percent of the total sales amount." Of this, "Han-on System and Hyundai Wia's sales in the U.S. accounted for about 10 percent of the total sales amount."
"The study found that the risk of exposure to the virus reached 100 percent, indicating a high degree of risk."