Trump's Tariff Threat: How Will South Korea's Economy Respond?

President Donald Trump has sent tariff warning letters to major countries including South Korea, announcing a 25% tariff to be imposed starting in August. This trade policy shock is creating ripple effects across the global economy, raising concerns about its impact on South Korea.

Economic Ripple Effects

Trump's tariff policy extends beyond simple trade conflicts, potentially leading to global inflation deterioration and upward pressure on interest rates. Experts warn that "tariff increases by the hegemonic United States will reduce global trade volumes, leading to GDP decline and economic growth slowdown."

The strengthening dollar is intensifying won weakness. The won-dollar exchange rate rose to 1,370 won during Tuesday trading, showing instability. The Bank of Korea's New York office has suggested that the tariff policy's impact on the US economy may be prolonged.

Corporate Response Strategies

Korean companies are already reviewing various countermeasures including export price increases. However, concerns about export declines due to reduced price competitiveness are significant. Industries with high dependence on US exports are expected to face substantial impacts.

Securities firms analyze that tariff policies will negatively affect stock markets through inflation and interest rate increases. Indeed, US stock indices fell immediately after Trump's tariff letter announcement, while US Treasury yields rose.

Government Response Plans

The Korean government is actively preparing countermeasures for the tariff implementation. Trade authorities are working to minimize tariff burdens through negotiations with the US. Additionally, efforts are underway to diversify US exports and develop alternative markets.

Experts advise that "this tariff measure is likely not a short-term whim" and "long-term response strategies are necessary." They particularly emphasize the importance of reducing Korea's external dependence and strengthening the domestic economic base.

Despite Trump's tariff notifications, Korean stock markets have shown relative stability. This reflects the market's learning effect regarding Trump's policy changes.

Original: https://trendy.storydot.kr/economy/trump-tariff-korea-economy