U.S. tariffs leave Korean SMEs beset by unpredictable rules, stalled sales, growing storage costs

Containers for export are seen piled up at a port in Pyeongtaek, Gyeonggi, on Sept. 4. [YONHAP]

 
Korea posted record export figures in September, but the realities of the tariff-driven chaos faced by small and medium-sized enterprises (SMEs) tell a very different, colder story. 
 
In addition to the ongoing economic uncertainties stemming from prolonged negotiations between the Korean and U.S. governments over tariffs, SMEs face the headwinds of unpredictable taxes, stalled U.S. orders and mounting storage costs.
 
“Since June, our exports to the United States have been zero,” said Jeong Han-seong, CEO of Shinjin Fasteners, a midsize company exporting industrial bolts and nuts. “We have about 2 billion won [$1.42 million] worth of inventory stuck in port warehouses with no orders. It’s devastating.”
 

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Jeong said his U.S. exports have ground to a halt since Trump’s tariff hikes took effect. With U.S. buyers canceling orders, he now faces massive warehousing costs while struggling to stay afloat.
 
“Expanding exports to markets outside the United States is easier said than done because China has already dominated most global markets," said Jeong.
 
Korea Inc. has been voicing concerns amid ongoing tariff negotiations that seem stuck in a stalemate, but the desperate cries of small businesses have gone unheeded as they struggle under the weight of volatile tariffs, unfair contract terms, and limited human and informational resources.
 
The Korea Trade-Investment Promotion Agency’s (Kotra) “Tariff Emergency 119” hotline for exporters received 7,722 consultation requests from Feb. 18 to Sept. 19, according to the agency. Most were from SMEs seeking advice on tariff classification, with 5,383 cases counted. Additionally, there were 464 calls made for market diversification and 254 consultations requested for relocating production bases.
 
In particular, consultations spiked in April and August — immediately following Trump’s announcements and the expiration of tariff grace periods, highlighting the unpredictability and confusion caused by abrupt U.S. policy shifts.
 

U.S. President Donald Trump holds a signed executive order on tariffs, in the Rose Garden at the White House in Washington on April 2. [REUTERS/YONHAP]

 
A key hurdle is navigating the unclear and inconsistent tariff regulations under Section 232 of the U.S. Trade Expansion Act, which imposes duties of up to 50 percent on steel, aluminum and copper imports.
 
“The tariff amount can vary dramatically depending on whether it’s based on material costs or includes labor and processing fees,” said customs broker Jang Go-eun. “Even U.S. Customs and Border Protection (CBP) lacks a clear standard, leading to differing interpretations depending on the agent.”
 
Several Korean exporters have been hit with steep, unexpected duties. One food exporter, for example, was charged a 200 percent tariff by the United States' customs authorities due to aluminum packaging deemed of Russian origin, despite prior declarations. Another machinery exporter faced a 25 percent duty instead of the initially planned 10 percent, simply due to a one-day shipping delay.
 
“We used to export to the United States with zero tariffs,” said a copper product exporter. “Now it’s suddenly 50 percent. It’s a severe blow to revenue.”
 
Disadvantageous contract structures also burden many SMEs. Under Delivery Duty Paid (DDP) contracts — common when selling via Amazon or directly to U.S. consumers — the Korean exporter pays the tariff. Previously, FTAs mitigated this, but with the FTA’s terms now effectively invalidated by tariffs, companies shoulder the full costs.
 

Containers for export are seen piled up at a port in Pyeongtaek, Gyeonggi, on Sept. 4. [NEWS1]

 
Even with Free On Board (FOB) contracts, where the U.S. importer pays duties, some buyers are demanding cost-sharing due to the unpredictable increases.
 
And unlike large conglomerates, SMEs often lack the resources and expertise to respond effectively.
 
“I handle everything myself — trademark registration, health certifications, multilingual content,” said a beauty startup CEO. “Unlike large corporations, roles are not divided across departments, so our responsive capabilities are limited, and it's difficult to penetrate major distribution channels.”
 
A JoongAng Ilbo survey of 118 Kotra global trade center heads found that 68.6 percent believe SMEs are more affected by U.S. tariffs than large corporations, while 31.4 percent believed conglomerates were hit harder by the tariffs.  
 
“SMEs have higher cost ratios and tighter margins, making them more vulnerable,” said a European trade center chief.
 
“Many lack English-language catalogs or websites, leaving them ill-prepared for protectionist environments,” said a Canadian trade center chief. “In a global protectionist environment, lack of prior preparation and a lack of localization strategies are major risks.”
 

A truck passes stacked shipping containers at the Port of Los Angeles on Sept. 26. [AFP/YONHAP]

 
This highlights the importance of supply chain diversification and the exploration of alternative markets. Korea's exports last month reached $65.95 billion, a 12.7 percent increase year-on-year, breaking the record in three and a half years, according to the Ministry of Trade, Industry and Energy. This growth is attributed to the diversification of exports to Europe, particularly in the automotive sector.
 
However, the situation is different for SMEs. They must re-establish local quality certifications and distribution networks, but unlike large corporations, this isn't easy to achieve in a short period of time.
 
“Large-tier suppliers may adapt quickly, but it's difficult for the remaining thousands of SMEs to act as a single entity,” said Lee Taek-sung, CEO of Dae Han Lee Yon, an auto parts supplier.
 
Experts recommend initially "persevering" and "practical response" to overcome the crisis, followed by a long-term redesign of the supply chain.
 

U.S. President Donald Trump holds a document titled ″Foreign Trade Barriers″ as he delivers remarks on tariffs in the Rose Garden at the White House in Washington on April 2. [REUTERS/YONHAP]

 
“Eventually, U.S. consumers will feel the pinch of higher tariffs, forcing a policy shift,” said Lee Geum-ha, head of Kotra’s North American Regional Headquarters. “Until then, companies should fine-tune their supply chains and production capacities.”
 
“Companies should study U.S. tariff exemption rules, adjust sourcing ratios and consider partial local production,” said customs broker Kwon Ji-won. “Applying for binding rulings from U.S. customs can also improve predictability. It's crucial to adjust the tariff burden at the contract stage with U.S. importers or design export prices that reflect the tariff differentials with competing countries.”
 
As negotiations between the Korean and U.S. governments drag on, a proactive role from the government is also crucial.
 
“SMEs find it difficult to diversify their supply chains on their own, so they need support for local market research and expanded export vouchers,” said Noh Min-seon, a researcher at the Korea SMEs & Startups Institute. "There's also a need to establish an organic cooperative system between the government and private support organizations like Kotra."
 
“Companies affected by tariffs should be provided with prompt support, including low-interest loans and emergency funds,” said Chang Sang-sik, head of the Korea International Trade Association's international trade research division.


This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY NA SANG-HYEON [lim.jeongwon@joongang.co.kr]