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Trump's first 100 days rattle export-driven Korean economy, highlight urgent need for tariff deal

Published: 27 Apr. 2025, 14:01

U.S. President Donald Trump speaks briefly to the media after a surprise appearance on the North Lawn, where he said he was inspecting where to put a flag pole, in Washington on April 23. [EPA/YONHAP]

A whirlwind of “America First” economic policy shifts by U.S. President Donald Trump during the first 100 days of his second term has sent shock waves through the Korean market and its trade-dependent economy, with the country bracing for escalating China-U.S. trade tensions.

The turbulent and equally unpredictable first 100 days may highlight the need for Seoul to quickly strike a deal with the United States before the latter's new tariff scheme takes effect in full force, given the serious damage it has already caused to the Korean economy, experts said Sunday.

Since his return to the White House on Jan. 20, Trump has launched an aggressive tariff campaign, short-listing Korea and a few other trade partners, including Japan, as the “worst offenders” for engaging in what he described as unfair trade practices with the United States

Earlier this month, Washington announced a minimum 10 percent “baseline” tariff on all imports to the United States and “reciprocal” tariffs, including 25 percent duties for Korea, that targeted some 60 countries.

Shortly after the announcement, however, Trump paused the implementation of the reciprocal tariffs for 90 days and said his government would hold separate talks with trade partners.

But steel, aluminum, automobiles and auto parts have been among the primary targets of industry-specific tariffs.

New cars for export on a car carrier trailer arrive at a port in Pyeongtaek, Gyeonggi on April 15. [AP/YONHAP]

Trump is also looking to impose new tariffs on semiconductors and pharmaceuticals, with investigations into such imports currently underway.

His tariff policy, if fully implemented, is widely expected to deal a severe blow especially to Korea's export-dependent economy as many of the import products targeted by the Trump administration also happen to be Seoul's key export items.

“The Trump administration's tariff policy has proved stronger than expected and highly volatile. It is expected to have a significant impact on the Korean economy, given that its exports to the United States account for a substantial portion,” said Shin Ji-young, an analyst from the Hyundai Research Institute.

Korea has already felt the brunt of Washington's renewed protectionist moves, even though the full potential effect of the sweeping tariff plan has yet to be realized.

The GDP fell 0.2 percent in the first quarter of 2025 from the prior quarter, according to preliminary data released earlier by the Bank of Korea (BOK).

The BOK had previously expected the economy to grow 0.2 percent in the January-March period even when taking into account the impact of domestic political turmoil caused by former President Yoon Suk Yeol's shocking imposition of martial law in December.

The U.S. tariff scheme apparently continues to adversely affect Asia's fourth-largest economy this month, with its exports falling 5.2 percent from a year earlier in the first 20 days of April. Shipments to the United States, in particular, plunged 14.3 percent on year, according to an earlier report.

The BOK earlier forecast a 1.5 percent expansion for this year, but the figure is widely expected to fall significantly. The International Monetary Fund (IMF) halved its 2025 growth outlook for the Korean economy to 1 percent this week, only about two months after presenting a 2 percent growth forecast in February.

Hyundai Motor Group Executive Chair Euisun Chung announces a $21 billion investment in the United States as U.S. President Donald Trump, second from right, and Louisiana Gov. Jeff Landry, far right, stand in the Roosevelt Room at the White House in Washington on March 24. [AP/YONHAP]

Fears of intensifying trade tensions between the United States and China also remain high after Trump raised tariffs on Chinese imports to as high as 145 percent and Beijing pledged retaliatory measures.

“Severe downside risks exist, including the application of reciprocal tariffs and broader spillover of policy uncertainty, which could lead to an even sharper decline of 1.5 percent in global goods trade and hurt export-oriented least-developed countries,” the World Trade Organization (WTO) said in a recent report.

BOK Gov. Rhee Chang-yong likened the tariff issue to “suddenly entering a dark tunnel,” as the central bank kept its benchmark interest rate unchanged in a bid to ensure financial stability.

The drastic tariff campaign, compounded by the domestic political chaos, pushed the local currency well below the 1,400 won level against the dollar, a level unseen since 2009.

The stock market has also been on a roller coaster ride, with the average intraday volatility of the benchmark Kospi reaching 1.97 percent during the first 11 days of April, the highest level in more than four years, according to the Korea Exchange.

A currency trader watches monitors near a screen showing the Korea Composite Stock Price Index, top left, and the foreign exchange rate between dollar and Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in central Seoul on April 25. [AP/YONHAP]

Investors are seeking safe havens, with foreign investors remaining net sellers of Korean stocks for the eighth consecutive month in March.

Companies and the government are reviewing supply chain strategies and exploring new export destinations while formulating a long-term plan seems difficult if not impossible.

“Trump's policies are highly unpredictable, and both upside and downside risks remain open,” said Jang Min, a senior researcher at the Korea Institute of Finance.
Eyes are on an envisioned trade “July package” that Korea and the United States on Thursday agreed to craft before July 8 when the 90-day tariff pause is set to be lifted.

The agreement was reached during their first tariff talks in Washington, with the envisioned deal set to focus on four categories; tariff and nontariff measures, economic security, investment cooperation and currency policy.

The Seoul government said it has requested exemptions from reciprocal and item-specific tariffs while offering cooperation in the shipbuilding sector, the Alaska pipeline project and other energy and investment fields. The two sides will launch working-level talks this week for details.

U.S. Treasury Secretary Scott Bessent called the inaugural tariff meeting with Korea “very successful,” saying that the two sides “may be moving faster than I thought,” while Finance Minister and Deputy Prime Minister Choi Sang-mok said they had “calm, orderly consultations without haste.”

The crucial trade negotiation came at a time when Korea is experiencing a lack of political leadership following Yoon's impeachment over his failed martial law declaration.

A presidential election is scheduled for June 3.

“One plausible option is to outline the broad framework of the talks and reach a compromise, while leaving more delicate issues to the next administration,” said Prof. Heo Yoon of Sogang University.

“Given the urgency of the situation, the parties are advised to show united support for the negotiating team so that the U.S. can trust that any deal will remain valid under the next government. For Korea, the next 100 days may prove even more crucial than the past 100 days,” he added.

Yonhap