- Trump's 'tariff war' purpose is no exports! It means to come to the U.S. and enter the company
- South Korean stock market value-up? 50 points to 53 points? Even the National Pension Service goes to the U.S. stock market?
[News FM Lee Ik-seon Choi Soo-young Issue & People]
□ Broadcast date and time: November 27, 2024 (Wednesday)
□ Host: Lee Ik-seon, Choi Soo-young
□ Contributor: Kim Kwang-seok, Adjunct Professor of Hanyang University (Director of Economic Research, Korea Economic Industry Research Institute)
* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.
◇ Profit line: Is the issue far? This time gives you valuable information that makes money just by listening carefully. Hit instructors in each field will tell you how to reduce taxes, real estate, and stock trends. Today, we have Kim Kwang-seok, an adjunct professor at Hanyang University, head of the Economic Research Division of the Korea Economic Industry Research Institute. Please come in.
◆Choi Soo-young: The first issue I'm going to ask the head of the department today is tariffs. President-elect Trump's declaration of additional tariffs on Mexico, Canada and China opens the tariff war. With this evaluation, if the tariff policy becomes a reality, won't the FTA free trade agreement be neutralized?
▣ Kim Kwang-seok: He's saying he'll neutralize the free trade agreement itself. And you can say that first as a negotiation deal to neutralize those things, and if you think about it basically, what is Trump? If you think Trump is the guest of our Issue & People, then what kind of person is Trump as People? Trump is a negotiator. Then what kind of negotiations are you going to lead? You keep saying something. I'm going to hit the tariff. I'm going to take away the subsidy. So what are they trying to get?
◆ Choi Soo-young: It's the national interest of the United States.
▣ Kim Kwang-seok: What is the national interest of the United States? It's to build a factory in the United States. Samsung Electronics, Hyundai Motor and the Korean government will renegotiate the FTA, but make some plans to expand more factories in Samsung Electronics, Hyundai Motor and the U.S.! Then I'll take out the subsidy. I won't take the subsidy. I'll give you more subsidy. In fact, you have to give a subsidy. Aren't you going to give it to me? I decided to receive it and expanded it. I also went to the SK-on battery factory in Atlanta last summer. But why are you building a factory there? I promised the Biden administration. I'm going to get a subsidy. But you're saying you won't give me that subsidy. But you have to give what you were supposed to give. Then I don't know if it's going to go down or not.
◇Lee Ik-seon: How can you trust me if you break your promise like this?
▣ Kim Kwang-seok: Trust is ignored. How will companies worry if they say they won't give it? I'm sure you're thinking about getting it. Then, in order to receive this subsidy, we need to do something more that the U.S. government wants. So we need to do something more that we want in the negotiation deal. Do I need to give more factories? Do we need to expand it a little more?
◇Lee Ik-seon: You know this. Eul is the company that borrowed a lot of money when generating PF. At first, if you ask me to make more money because I can pay you back if I do this a little more now, then there's suddenly a déjà vu that the bank lends you more money. Is it similar?
▣Kim Kwang-seok: You said something important, but basically, what is the big picture that Trump draws? This is a very important picture. There's a saying that Trump keeps wearing it on his hat, saying, "What do you want ultimately?" Make America Great Again 'MAGA' is so abstract now. If I explain that in detail, what would it be? What it means is that it will attract all promising high-tech industries in the future and place them in the United States.
◆Choi Soo-young: So you're saying not to come through the border, but to come and do it in the United States.
▣ Kim Kwang-seok: Don't export. Why do you keep exporting? We build a factory in the United States. So what's stopping you from exporting? It's a tariff. It's hard to export if the tariff is high. How do you export it? Build a factory in America. And as expected, look. Who did you make the main target country? Mexico and Canada! Mexico and Canada are the North American Free Trade Agreement that we know well. Then many multinational companies are the largest markets in the United States, so we have taken a strategy to export various things in the United States. Let's use the labor to monopolize it in Mexico and export it with zero tariffs. So what does Trump hate? They don't like FTAs. Rather, it is difficult to renegotiate or destroy the FTA immediately, so cooperation between the two countries should be processed again. Before that, what are you going to do first before you decide to have that negotiation process, renegotiation process, or scrap it? I'll hit the tariff first. So what are you going to do with the renegotiation process? Now, the trade ministries of each country will go out. In Korea, it is called USTR, so each country's trade representatives will go and negotiate, but before we negotiate, we'll keep beating them. If we say we're going to take away subsidies, don't we have to listen to what the U.S. wants so that we won't take away important things? That's why I'm asking you to think about that more.
◆Choi Soo-young: But the problem here is our companies. Aren't we directly hit by Korean companies that have built China and moved to Mexico in large numbers?
▣ Kim Kwang-seok: It's a direct hit. It's a direct hit. So, we haven't announced our country's retaliation for tariffs yet. I won't slap tariffs on our country. You didn't say that. I know. It's okay in Korea. That's a great illusion. It's such a strong illusion. So, this is a global value chain. For example, I'm holding a pen like this, and this one is not just made in Korea and exported to a specific country. It goes through about 150 countries to make one of these. All the materials here are made through more than 100 countries. In order to make a smartphone here, various materials, parts, manufacturing processes, etc. that are put together in hundreds of countries are products like this. So hitting tariffs on a particular country is the most representative of China's blocking of our export of parts to that country. Our country's exports to China are 25%. Then, a quarter of Korea's total exports are to China. Then hitting tariffs on China means that our exports to China will be blocked. So in the end, the trade war with China symbolically means that our exports to China will be cut off. Korea is not a country that exports finished products to China. Korea is a country that exports intermediate goods from China. Why export industrial goods and intermediate goods industrial goods and intermediate goods? It's made in China, so it's trying to export to other countries, but hitting tariffs on China will reduce the size of Korea's exports to China. So this is not a simple problem to be overlooked.
◇ Profit line: I feel so unfair and there are aspects of it that are unfair, is there any way I can get this bailed out or get this right somewhere? How can you do it on your own?
▣Kim Kwang-seok: Trump has expressed that he does this as he pleases, so go back to the first period. The personality of the first Trump, for example, just hates all world treaties. Do you know what was the first thing Trump did in the first term? Withdrawal from the Paris climate agreement. Withdrawal from the United Nations Convention on Climate Change in Paris. Conversely, do you know what the first thing Biden did? Rejoin the Paris climate agreement. He is such a person who has extreme differences in respecting or ignoring world rules, commitment agreements, or world organizations. So I don't respect the WTO. Why should I follow that? I do not respect that. I don't respect the United Nations. Paris Climate Agreement I don't think so, but I don't recognize the WTO system. So what did you do during the 1st generation? I just raised the tariff. We had a tariff war.
◇ Lee Ik-seon: So there is no way we can correct this as promised to Biden without damaging it?
▣Kim Kwang-seok: It's not that there's none, but there's a huge whirlwind like this. Then we're in trouble. It's not this, but you have to think about how to respond to such a vortex. How to respond? I'm also meeting a lot of companies right now. Personally, I'm a person who paints these economic prospects or these Trump 2.0 scenarios, so I'm a person who plays that role, so I go to management strategy meetings a lot, so I'm going to go like this. Then, companies, respond like this. That's what I'm saying. Then, for example, it's a grocery company, so you don't have to worry. It is not targeted by tariffs. So, for example, when I go to a grocery company, what should I say? There is no need to panic. Please export hard. Rather, tension is created in the trade market, so please do what you have done to actively pioneer new markets. But on the contrary, there are items that are targeted by the tariff war. Rather, I would like to make efforts to move the production base, so I would like to suggest that we need to create a new strategy to suit the target industry.
◇ Profit line: After the global economy, what I'm really curious about is the domestic story. The Korean economy is difficult, and the Korean stock market has accepted the last report card among the world's major stock markets. How do you analyze the current situation in our stock market?
▣ Kim Kwang-seok: First of all, the stock market and the story I told you earlier is kind of a real economy. It is very important to understand the real economy and capital market separately. Because the global economy is also bad. Everything is bad except for the US. But Korea also has a bad real economy. But other countries aren't good either. The eurozone economy is worse than Korea's. Even so, the stock market is okay. So, how to explain this is necessary to distinguish between the capital market and the real economy for a while and understand it. If you link this together, you don't understand, so many people need to have a good economy to increase housing prices. The stock goes up only when the economy is good. No. Will housing prices rise only when the economy is in good shape? Then why did house prices rise this year? The economy is bad, but the economy has to improve, right? That's the wrong formula. What does supply and demand move according to? It's the movement of money. Where did the money move to in the stock market I just mentioned? Did you move to the United States? Then why did you move? There was a strong dollar phenomenon. Why is there a strong dollar phenomenon? I think the U.S. economy, especially Trump, is going to take a very strong drive around the U.S., so I took a real drive. The Trump administration in the U.S. hasn't even started yet. Because I believe so, psychologically, the movement to hold dollars causes the strong dollar phenomenon and holds dollars. We have to invest in the U.S. stock market. We have to hold U.S. bonds. That's because the money moves there and the dollar becomes stronger.
◆Choi Soo-young: Then you keep getting better over there, but you get better.
▣ Kim Kwang-seok: Especially in the meantime, negative expectations that the Korean economy seems to be in a bad shape for China's economy. China's economy is in a bad shape. China's export-dependent country Korea. Also, the Korean economy is structurally bad internally. If you look at the so-called Korean economy, it's politically bad. So, in our Korean economy, I'm not a political critic, but I'm fighting over the past. This is very dangerous. You have to fight for the future now, but you're fighting with the past.
◇Lee Ik-seon: You said this in a bone-chilling way. That's right.
▣ Kim Kwang-seok: The way to compare it is that a huge ship called Korea is in front of a huge whirlpool, and the ship called Korea is fighting among the crew members. We have to fight over how this ship will deflect the whirlwind, and we have to fight over whether this is the right way or not, but they are fighting among themselves. I'm doing that right now. Then, do Korean stock investors invest in Korea, foreign investors, institutional investors invest in Korea? Money is going out. It's MoneyMove to the U.S. So moving to the U.S. That's one of the reasons why the Korean stock market is weak. That's why it's causing another strong dollar. It's a long time to explain, but I can compress it to this extent.
◆Choi Soo-young: That's why we can't help but pick Samsung Electronics as the most representative case in the stock market downturn. We talked about 100,000 electrons, but now 40,000 electrons are approaching as everyday terms. What do you think Samsung Electronics will do in the future?
▣Kim Kwang-seok: If I give you my opinion, I'm looking at the macroeconomy and the semiconductor market as a variable. It's looking at semiconductors from an outsider's point of view. And if you look at semiconductors from a market perspective, the semiconductor market was divided like this until last year. Memory semiconductors or non-memory semiconductors, but now the market must be divided differently. The reason why I'm telling you this is because Samsung Electronics can't do it. I am good at it. I'm good at it, but I'm good at semiconductors in the non-AI sector. I'm still good. But you're doing well in the non-AI sector, so winter hasn't come to the semiconductor market. Winter has come to the semiconductor market in the non-AI sector. Semiconductors in the AI sector are. It's still summer. It's summer all the time. However, I want to do well in semiconductors in the non-AI sector and advance into the AI sector, but no significant results have been made yet. So, Samsung Electronics is being evaluated as a difficult situation.
◇Lee Ik-seon: Speaking of which, there is actually a lot of talk about Samsung's leadership today. But just in time, Samsung Electronics' year-end regular personnel appointments were announced today. I heard that executives in the semiconductor foundry division have been replaced, but what changes are there in the AI-related sector you mentioned?
▣Kim Kwang-seok: I'll give you an opinion on this part anyway. I've also been to Samsung Electronics Semiconductor Research Institute. In addition, we meet all Samsung Electronics sectors, various executives, and expatriates who will be dispatched to Samsung Group next week as expatriates in Korea this year, and we will give lectures on this topic. From that point of view, I would like to say that Samsung Electronics is now in great agony and that it is a personnel appointment carried out because it is in great agony. What's your concern? Anyway, I have made a lot of personnel decisions recently, but I still haven't achieved such results in the semiconductor field of the AI sector, which I just mentioned, so this is a conclusion without reading the change in management paradigm. In conclusion, he couldn't read and respond well to the change in management paradigm. So, I grew up in an area where there is an opportunity on this side and there is no opportunity on this side, but there is no opportunity on this side. We have to continue to transition into areas where we have the opportunity. For example, Japan should have abandoned its existing cameras and responded to the paradigm shift, such as going to digital cameras or smartphones, but it couldn't. Just as Japan does, there is a paradigm shift in the semiconductor sector as well. After reading such a paradigm shift, we have to change the direction of management strategy according to it, but in conclusion, it is evaluated as not being able to do it properly, so we made a decision accordingly. So I interpret that decision-making is an expression of a willingness to align the management strategic stance well in the future. From that point of view, I think there are some parts that we can look forward to.
◆Choi Soo-young: You gave a positive evaluation. But it's been a while since the word "value-up" appeared in the Korean stock market. In fact, the word "value-up" sounds plausible. But I don't think the results are coming out. So, when the domestic stock market is more sluggish than at the beginning of the year, you said you would do value-up, but why can't you do value-up?
▣Kim Kwang-seok: For example, I'm upset. We need to understand why Korea's stock price, which is essential, is particularly bad. I have to find a reason. This is very important. We're sick. I was sick about 5 months ago, but I thought it was a cold, so I only took cold medicine. It didn't heal for a month. So I went to the otolaryngology department. I was scolded by the doctor. It's not a cold, but why did you take cold medicine for a month?
◇Lee Ik-seon: What was it?
▣ Kim Kwang-seok: It's pneumonia. So I got better right away after taking pneumonia medicine. If the diagnosis is wrong, the prescription is wrong. But it's pneumonia, but I didn't diagnose it as a cold. So what this means is that if we make the wrong diagnosis about why the stock market is bad, we make the wrong prescription.
◇ Lee Ik-seon: Please give me a diagnosis.
▣ Kim Kwang-seok: What's the diagnosis of the economy is, for example, the problem with this capital market earlier is the money movement. The money kept going out. Even Koreans don't invest in stocks in Korea. Even foreigners don't invest in stocks in Korea. Money goes abroad. And even the money that was there was is only money from real estate. Even if interest rates are cut, they are driven to real estate and the domestic economy is not recovering. Then, we have to think about how to inflow money into the Korean stock market from foreign countries. For example. There's a word that I'm careful about whether I can say this on the show. Because even the National Pension Service and the Public Fund.
◆Choi Soo-young: Don't you invest in our stock market?
▣ Kim Kwang-seok: I don't. We are increasing the share of U.S. stocks. But there's also a reason for that. There's a good reason.
◇ Profit line: Because we need to increase our profits?
▣Kim Kwang-seok: Should I forget the fund? Don't forget about the fund. So it has its own purpose. But from the government's point of view, can even the fund management headquarters tell Korean individual investors or financial institutions to invest in Korean stocks at a time when even institutions among them are increasing the share of U.S. stocks? So this is a vicious cycle of a vicious cycle. It basically doesn't add up. Whatever the connection, public sympathy, public funds increase the share of Korea's stock investment, Korean financial institutions and individual investors increase their investment in Korean stocks, which leads to the growth of Korea's real economy and never forgets the national pension, so it can be connected in a virtuous cycle and foreign investors who see it can invest in Korea. First of all, I have a lot to say, but in short, we have to think about the link that leads to a virtuous cycle in which money can flow into Korea, and the policy of making 53 points for other minor 50 points doesn't really help.
◆Choi Soo-young: You're saying it should be a fundamental value-up.
▣ Kim Kwang-seok: We have to think about the fundamentals. It's a movement of money.
◇ Profits line: It was announced last week that the financial authorities would inject 200 billion won into the stock market value-up fund. But how effective are these authorities' measures? That's what they're saying.
▣ Kim Kwang-seok: Like I said, are those kind of fundamental measures, so what's the point of 200 billion won? May I tell you a simple formula? Investors investing in the stock market can be classified into three categories. Individual investors, institutional investors, foreign investors, but no matter how much I look at it, I don't want foreign investors to come into Korea. If that's the case, a third of them will get out. So what's the point of thinking that one-third of the 200 billion won is getting out while one-third is getting out while one-third is getting out? This is a policy that induces a virtuous cycle, and there are many limitations to thinking about how much more to inflow and how much to value up more temporarily.
◇ Lee Ik-seon: Then what kind of policy should be provided?
▣Kim Kwang-seok: As I said earlier, I told you to increase the share of U.S. stocks. It's a bit burdensome to say this on the show. As I said earlier, it is difficult to ask you to invest in Korean stocks with patriotism as public funds are increasing the proportion of the U.S. It's very difficult, but establishing a fundamental system for everyone to increase the proportion of Korean stocks can bring about the efficiency of investment. That's why investing in Korean stocks makes them more attractive than investing in other countries. Multiple conditions
◆Choi Soo-young: Does that mean the system should be included?
▣ Kim Kwang-seok: That's right
◆Choi Soo-young: Then is it helpful to talk about the revision of the commercial law now?
▣ Kim Kwang-seok: That's right. Various things like that
◇ Profit line: It's a good thing to abolish the gold tax.
▣Kim Kwang-seok: Regardless of which system is better one by one, it is to create a system that allows sufficient return of shareholders anyway, gives sufficient return on investment to shareholders, and brings more return on investment than anything else. Anyway, it is not a concern in Korea, but it makes me feel that it is much more advantageous to invest in Korea than to invest in other countries.
◇ Profit line: Is the issue far? I was with Hanyang University professor Kim Kwang-seok. Thank you.
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