Roula Khalaf, Editor of the Financial Times, curates her top stories in a weekly newsletter called the Editor’s Digest, available for free.
In the first quarter, South Korea’s economy experienced a contraction, influenced by political instability and growing concerns over the impact of President Donald Trump’s tariffs on exports to the United States. The Bank of Korea reported that the country’s GDP decreased by 0.2 percent compared to the previous quarter and contracted by 0.1 percent year-on-year.
This economic downturn coincided with heightened concerns about US tariffs, particularly a 25 percent duty on steel imports from South Korea imposed in mid-March by the Trump administration. Domestic consumption also declined by 0.1 percent, as consumer spending was affected by the political crisis following President Yoon Suk Yeol’s brief attempt to declare martial law in December. Yoon was recently removed from office, leading to a new presidential election set for June 3.
South Korea’s economic outlook has further dimmed since the recent imposition of a 25 percent tariff on autos and auto parts by President Trump, which comprises about a third of South Korea’s exports to the US. Finance Minister Choi Sang-mok and Industry Minister Ahn Duk-geun planned to meet with US counterparts in Washington for tariff negotiations, with Ahn aiming for a swift agreement to reduce or lift the auto duties.
Acting President Han Duck-soo previously stated that South Korea would not retaliate against Trump’s tariffs, highlighting the historical debt to Washington. Instead, Han mentioned that Seoul would pursue “solutions which are more win-win for both” countries.
According to South Korean customs data released on Monday, the US tariffs were already affecting trade, with a 5.2 percent drop in exports from a year earlier during the first 20 days of April. Shipments to the US decreased by 14.3 percent, while those to China fell by 3.4 percent. In addition to the auto tariffs, the US has implemented a general 10 percent tariff on imports from South Korea.
In response, the South Korean government is preparing an additional budget of Won12 trillion ($8.4 billion) to address the tariffs’ effects, though economists suggest it may not fully mitigate the impact. The Bank of Korea, which recently maintained its base interest rate at 2.75 percent, has indicated potential rate cuts in the coming quarters to support the slowing growth.
