South Korean President Lee Warns Against Chip Tariffs as US Eyes Protectionist Push

South Korea’s President Lee has emerged as a vocal critic of the proposed 100% tariff on semiconductor imports, arguing that such aggressive trade measures would ultimately harm American consumers rather than protect domestic manufacturers. In recent remarks, Lee made a compelling economic case against the tariff regime that U.S. Commerce Secretary Howard Lutnick recently proposed to pressure South Korean and Taiwanese chipmakers into building more production capacity on American soil.

The Market Reality: Why Tariffs Won’t Work as Intended

The crux of Lee’s argument centers on a market concentration problem that fundamentally limits the tariff policy’s effectiveness. Since South Korean and Taiwanese semiconductor manufacturers control between 80-90% of the global chip market, imposing punitive duties on their imports would leave American companies with few alternatives. Rather than prompting U.S.-based production shifts, the tariff would simply pass through to consumers in the form of higher prices.

“Most of it is likely to be passed on to U.S. prices,” Lee stated during his remarks, highlighting how market dominance by Asian chipmakers means there’s nowhere else American companies can source components at competitive rates. This dynamic essentially transforms the tariff from a protectionist measure into a hidden tax on American businesses and consumers.

South Korea’s Trade Position Strengthens Despite Headwinds

Meanwhile, South Korea’s semiconductor sector continues to flourish. The country’s total exports reached a record $709.4 billion in 2025, marking a 3.8% increase year-over-year, with semiconductor shipments surging 22% on the back of strong artificial intelligence demand. Of the $173.4 billion in total semiconductor exports, approximately 8% flows to the United States, while China remains the largest market, followed by Taiwan and Vietnam.

Lee noted that South Korea already maintains safeguards under its existing trade agreement with the U.S., ensuring that Korean chipmakers won’t face disadvantages compared to Taiwanese or other international competitors. This existing framework potentially insulates Seoul from the worst impacts of future tariff escalation.

Currency Pressures and Economic Cross-Currents

Beyond trade policy, Lee also addressed the weakness plaguing South Korea’s won currency, which has declined against the dollar. South Korean authorities expect the exchange rate to stabilize around 1,400 won per dollar within the coming weeks. However, Lee acknowledged that domestic policy alone cannot fully stabilize foreign exchange markets, noting that the won’s weakness partially reflects broader regional currency dynamics, including the Japanese yen’s ongoing decline.

The North Korea Dimension and Long-Term Strategy

Lee also discussed ongoing diplomatic efforts to revive dialogue between North Korea and the United States, emphasizing that pragmatic engagement with Pyongyang remains essential despite the country’s continued nuclear weapons development. He highlighted the potential value in halting North Korean nuclear material production and stopping the development of intercontinental ballistic missiles, even while acknowledging that complete nuclear disarmament remains an unlikely outcome.

North Korea has rebuffed overtures from both Lee and President Donald Trump to resume negotiations, with talks stalled since Trump and Kim Jong Un’s 2019 meeting. The fundamental disagreements over sanctions relief and nuclear dismantlement continue to obstruct progress on the Korean peninsula’s security situation.