Trouble in South Korea: Trump's Tariffs Strike a Blow to Asia's Fourth-Largest Economy
South Korea experiences a economic contraction in the first quarter due to the impact of the trade war on exports.
Let's discuss the current turmoil in South Korea, shall we? The fierce, 25% "reciprocal" tariffs threatening South Korea, initiated by US President Donald Trump, has sent chills down the spine of Asia's fourth-biggest economy. It ain't pretty.
South Korea, already on its knees from the political chaos spurred by former President Yoon Suk Yeol's desperate attempt to enforce martial law, has been left defenseless against the upcoming trade offensive. The combination of political unrest and a potential trade war with the US is a double whammy no economy wants to deal with.
The central bank reported a slight contraction in the real GDP, as it declined by 0.1% compared to the same period last year. Yikes! Economists like Hyosung Kwon, an expert at Bloomberg Economics, pointed out that the economy is expected to rebound in the second quarter of this year, but will remain fragile due to the looming US tariffs and lingering uncertainty at home.
Export Woes Galore
In the first quarter of last year, South Korea's economy expanded 1.3%, but it fell flat in the fourth quarter as the crisis unfolded. As of mid-April 2025, the country's exports have plummeted by more than 5%, with a drop reported across nine out of ten major export categories, excluding semiconductors.
The sharpest decline was observed in exports to the United States, which dipped by a staggering 14%. The International Monetary Fund (IMF) has already slashed its growth forecast for South Korea drastically, cutting it from 2.0% to 1.0% for the year.
The US tariffs on steel, automobiles, and other goods, major targets in Trump's trade war arsenal, will cause quite a ruckus for Korean industries and businesses. Acting President Han Duck-soo echoed these concerns in a speech to the National Assembly, highlighting the uncertain and tumultuous global economic landscape the US-driven tariffs have created.
The gloom is far from over for South Korea, but at least they're talking the trade war through with the US. Sources say they've agreed to a tentative "July package" deal in principle, with USS tariffs on South Korea potentially being lifted by July 8, 2025. If that's the case, maybe, just maybe, South Korea can catch its breath and begin to recover.
So there you have it, folks! A tangled mess that's been created by a trade tantrum. Here's hoping that diplomacy prevails, and these economies can get back on their feet!
© 2025 AFP
- South Korean industries and businesses will face a significant challenge due to the US tariffs on steel, automobiles, and other goods, as highlighted by Acting President Han Duck-soo in a speech to the National Assembly.
- South Korea's economy is expected to rebound in the second quarter of this year, according to Hyosung Kwon, an expert at Bloomberg Economics, but the economy will remain fragile due to the ongoing trade tensions with the United States and the lingering uncertainty at home.
- The international General-News outlets have closely followed the trade dispute between the United States and South Korea, with reports of South Korea's exports to the United States dropping by a staggering 14% in the first quarter of the year.
- With the US tariffs on South Korea's major exports, the country's GDP contracted slightly, with a decline of 0.1% compared to the same period last year, according to the central bank's report.
- The potential removal of tariffs on South Korean goods, as part of the July package deal between the US and South Korea, may offer a glimmer of hope for South Korea's economy, which has been struggling amid political instability and the ongoing trade dispute with the United States.
