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U.S. tariffs, currency tensions escalate pressure on Korea

Published: 10 Apr. 2025, 00:00

As the United States’ reciprocal tariffs took effect on April 9, and the KOSPI fell below the 2,300 mark, reporters visited the dealing room at Hana Bank’s headquarters in Jung District, central Seoul, to photograph a screen displaying the plunging index. [YONHAP]

The Korean economy stands at a precarious juncture following the activation of U.S. President Donald Trump’s country-specific “reciprocal” tariffs, which took effect Tuesday afternoon, Korea time. The Kospi index quickly dipped below the 2,300 mark as markets absorbed the implications.

The United States imposed an additional 50 percent tariff in retaliation against China’s countermeasures, bringing the cumulative U.S. tariff on Chinese goods to 104 percent. The scale of the escalation is widely interpreted as a signal that Washington may be willing to shut down trade altogether.

China’s response has included a devaluation of the yuan, raising the prospect that the tariff war could evolve into a currency battle. A weaker yuan tends to drag down the Korean won. The won fell to 1,484.1 against the U.S. dollar on Tuesday — its lowest point since the 2008 financial crisis.

Korea’s economic outlook, already dim, continues to deteriorate. The Asian Development Bank revised its 2025 growth projection for Korea down to 1.5 percent, while some investment banks, including JPMorgan, foresee growth slipping below 1 percent. Hopes that Korea’s inclusion in the World Government Bond Index would bring inflows of foreign capital were also dampened, as the decision was pushed to next April.

Against this backdrop, acting President Han Duck-soo held his first phone call with Trump this week — a necessary, if belated, move. Trade Minister Chung In-kyo has begun negotiations in Washington, though ministerial-level talks offer limited leverage. The recent visit by EU Trade Commissioner Maros Sefcovic ended fruitlessly, as key U.S. officials lacked the authority to finalize any agreement. As has been the case throughout Trump's tenure, the power to make trade decisions rests with the president alone.

In navigating this crisis, Korea must avoid fragmentation. Former trade officials often cite domestic political infighting as more damaging than external pressure. Unity across government, business and politics is essential.

Other nations offer models. Mexico kept its public informed during trade talks, while Canada turned U.S. pressure into a moment of political cohesion. Korea, too, must seek a coordinated, transparent approach within the framework of existing free trade agreements.

Meeting this moment will require more than quiet diplomacy. It demands the full force of national consensus.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.