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U.S. tariffs, sluggish production fueling downward risks for Korean economy: KDI

Published: 07 Apr. 2025, 12:15 Updated: 07 Apr. 2025, 14:52

Shipping containers are stacked at a port in the southeastern city of Busan on April 3. [YONHAP]

Korea's economy is facing "mounting" downside risks due to sluggish production and heightened trade uncertainties sparked by U.S. tariffs, a state-run economic think tank said Monday.

"Recently, the Korean economy is facing mounting downward pressure as weakened growth in domestic and external demand has weighed on production and U.S. tariff hikes have exacerbated global trade uncertainties," the Korea Development Institute (KDI) said in its monthly economic assessment report.

The KDI has now noted downside risks for Asia's fourth-largest economy for the fourth consecutive month.

While equipment investment remains on a solid trajectory, continued sluggishness in construction investment and weak consumption growth are limiting the pace of domestic demand recovery, the KDI said.

The think tank added that business sentiment is weakening among export-oriented companies as trade tensions have risen and global growth projections have been revised downward due to the Donald Trump administration's protectionist trade policies.

With the impact of U.S. tariff hikes beginning to materialize in April, business sentiment is likely to come under further pressure, it noted.

In detail, the country's exports fell 2.1 percent from a year earlier in the first quarter to $159.9 billion, mainly due to a slowdown in outbound shipments of semiconductors and automobiles.

The report also showed employment conditions are continuing to weaken, particularly in the construction and manufacturing sectors, with unemployment rates rising across all age groups in February.

Yonhap