Korean Steel Export Volumes Plummet
Impact of Economic Downturn Coupled with Tariff Uncertainty
Key Production Facilities Relocating Overseas One After Another

As the Trump administration intensifies its tariff-driven trade policy, South Korean industries are increasingly caught in the crossfire. From steel and smartphones to home appliances, the ripple effects are sweeping through key export sectors. The imposition of steep tariffs—25% on imported steel and a shocking 46% on Vietnamese goods—has not only disrupted supply chains but also deepened anxieties about the long-term future of Korean manufacturing. These developments underscore a growing trend: South Korea’s industrial base is being hollowed out, caught between U.S. protectionism and China’s global supply glut. Nowhere is this shift more evident than in the plunge of steel exports to Mexico and the looming crisis for Korean firms relying on Vietnam-based production.

Steel Exports to Mexico in March Down 38% – Largest Drop Among Major Destinations

The consequences of the new steel tariff were immediate. Since the U.S. began enforcing a 25% duty on imported steel on March 12, South Korean steel exports have suffered a sharp decline. Between April 1 and 20, total steel exports dropped to $2.415 billion—down 8.7% compared to the same period last year. This follows a 4.9% decline in March, reversing February’s 5% year-on-year growth.

Among major trading partners, Mexico experienced the steepest decline. Once South Korea’s sixth-largest destination for steel, exports to Mexico plummeted by 38% in March to 141,864 tons. The United States, too, saw a 13.9% reduction in Korean steel imports. The data points to a jarring shift in trade patterns as exporters grapple with new restrictions and recalibrate their routes.

Economic Slump and Tariff Uncertainty Weighing on Mexico’s Steel Demand

Behind the numbers lies a deeper malaise. Mexico's steel demand has been contracting due to a prolonged economic slowdown. For seven consecutive months—from August of last year to February—industrial production has posted year-on-year declines. February’s manufacturing activity index fell by 2.4% compared to the same month a year earlier, landing at 101.7 points.

Amid this downturn, President Trump announced in February a 25% tariff on Mexican goods. The tariff, implemented on March 4, further dampened demand. Although products satisfying U.S.-Mexico-Canada Agreement (USMCA) origin rules were exempted just two days later, the policy whiplash left businesses uncertain. Korean conglomerates with operations in Mexico—Hyundai, Kia, Samsung, LG, Hyundai Mobis, and POSCO—heavily rely on Korean steel to maintain local production. The sudden tariff measures have prompted these companies to adopt a more cautious approach, unsure of how long exemptions will last or how future policies might evolve.

“De-Korea” Manufacturing Shift Accelerates

As tariff threats multiply and profits shrink, Korean firms are increasingly relocating their manufacturing operations abroad. The 46% tariff levied on Vietnamese exports—a major base for Korean smartphone and electronics production—has only added urgency. Samsung Electronics, for example, manufactures over half of its global smartphone supply in Vietnam’s Bac Ninh and Thai Nguyen provinces. These plants alone produce over 100 million units annually, primarily destined for the U.S. market.

With Vietnam-based exports now subject to new reciprocal tariffs, including up to 54% on Chinese-outsourced models, Samsung and others face mounting pressure. Even though the Trump administration offered a 90-day reprieve and limited the base tariff to 10% for non-Chinese nations starting April 2, the uncertainty remains overwhelming for firms operating in Vietnam.

This complex mix of protectionism, policy flip-flops, and great-power rivalry is accelerating what experts are calling the "industrial hollowing-out" of Korea. Advanced technologies are gravitating toward the U.S. under its economic security agenda, driven by policies like the CHIPS Act and Inflation Reduction Act. Traditional sectors, meanwhile, are being undercut by China’s oversupply of low-cost goods. Korean manufacturers, squeezed in the middle, are shifting their operations to India and Southeast Asia in search of stability and profitability.

This phenomenon has spanned administrations—from Trump’s first term to Biden’s tenure and back to Trump’s return—with each employing a different strategy: Biden’s incentives and Trump’s tariffs. The second Trump administration has leaned hard on tariffs as a key tool, accelerating the exodus of Korean manufacturing in sectors such as automotive, home appliances, semiconductors, and batteries.

As Professor Sunwook Jung of Sogang University observes, “Trump’s tariff policies are accelerating the U.S. manufacturing renaissance. For companies whose primary customers are overseas, leaving Korea has become inevitable.”