South Korea’s top export items have remained largely unchanged for the past two decades, raising concerns about the economy’s resilience to external shocks. Nine of the country’s 15 major export items are expected to face significant challenges under the second Trump administration, according to global consulting firm McKinsey. These nine items collectively account for roughly 60% of Korea’s total exports.
In a report released on Jan. 22, McKinsey & company Korea predicted that U.S. policies such as higher tariffs and the potential rollback of the CHIPS and Science Act could severely impact Korea’s exports in nine key sectors, including semiconductors and automobiles. McKinsey warned that Korea’s overreliance on these export items, combined with a lack of diversification and slow adoption of new growth technologies, would make it difficult for the country to recover from these shocks.
McKinsey likened Korea’s economy to a “frog in a pot of slowly boiling water” - an analogy it has been pushing for over a decade - and advised implementing urgent measures to escape, even if it means pouring hot water on the frog to force it out.
The report highlights nine key export items likely to experience declines under the second Trump administration: semiconductors, petroleum products, petrochemicals, automobiles, steel products, auto parts, displays, secondary batteries, and home appliances.
Automobiles, batteries, and home appliances are expected to suffer the most, according to the report. For automobiles, McKinsey pointed to the likely repeal of electric vehicle (EV) subsidies under the Inflation Reduction Act (IRA), which currently offers buyers up to $7,500 in tax credits, as a major risk for Korean exports. The Trump administration is also expected to impose tariffs on imported vehicles.
“Last year, approximately 35% of South Korea’s exports to the U.S. were automobiles and auto parts,” Mckinsey said. “If the IRA is repealed or subsidies are reduced, this figure is expected to drop to 2–17%.”
EV batteries are also vulnerable due to their heavy reliance on China for key minerals. “The Trump administration’s anticipated sanctions on China could disrupt EV battery supply chains,” the report noted. Domestic home appliance makers, producing goods in low-tariff countries like Mexico and Vietnam and then exporting to the U.S., will likely face hurdles if the Trump administration imposes higher tariffs on imports from these regions.
McKinsey said Korea’s export structure, which has remained unchanged for two decades, contributes to growing vulnerabilities. The country’s top 10 export items in 2005 and 2024 were nearly identical except for one. Semiconductors, the top export item last year, also ranked first in 2005, while automobiles have consistently held the second spot in both years. Other items, such as petroleum products, auto parts, ships, wireless communication devices, and steel plates, have remained in the top 10.
This lack of diversification suggests that Korea has been lagging in emerging technologies capable of carving out future growth markets. Based on an analysis of 50 strategic technologies, McKinsey found that Korea scored 81.7 points, the lowest among major economies, including the United States (100 points), the European Union (92.3 points), China (86.5 points), and Japan (85.2 points).
“If South Korea’s economy was a ‘frog in a pot’ a decade ago, it has now reached the point where the water is boiling,” said Chon Eunjo, Senior Partner at McKinsey Korea. “South Korea must act decisively to save the frog in 2025, even if it means pouring hot water to force it out of the pot.”
