Korea faces fall in exports, growth risks if U.S. tariffs escalate

Korea faces fall in exports, growth risks if U.S. tariffs escalate

최초입력 2025.05.23 10:53:10

(Yonhap)

South Korea’s exports could plunge decrease by up to 11% and its economic growth rate will take a hit of 0.7% if the United States imposes sweeping tariff hikes under a worst-case trade scenario, a government report warned on Thursday.
According to a report released by the National Assembly Budget Office (NABO) on Thursday, Korea’s exports could fall by 10.6 percent year-on-year, and its gross domestic product (GDP) growth rate could decline by 0.69 percentage points if U.S. President Donald Trump enforces a worst-case scenario 25 percent tariff on Korean goods and restores a 145 percent tariff on Chinese imports.
The United States is currently imposing a 25 percent tariff on specific imports, including automobiles, steel, and aluminum. Broader mutual tariffs on countries including Korea, Taiwan, and India, were temporarily suspended until July 8th, 2025, and a basic 10 percent tariff on all imports remains in effect until then. The tariff rate on China, which had been raised to 145%, was lowered to 30% and the grace period is 90 days, or until August 12th.
The analysis was authored by Choi Young-il, who heads NABO’s Macro-Economic Analysis Division, and suggests that the brunt of the impact would come through secondary effects on China, one of Korea’s largest trading partners.
The report estimates that under the worst-case scenario, exports to the United States could decline by 15.2 percent while those to China may drop even more by 31.1 percent. As exports account for more than 90 percent of the contribution to real GDP growth in Korea, a contraction of this magnitude would deal a significant blow to the broader economy.
“If a 145% tariff is imposed and the prices of Chinese products in the United States rise significantly, the volume of Chinese exports to the United States could decrease by up to 69%,” Choi said, adding, “This suggests that our exports to China could decrease by up to 31.1%.”
According to the Ministry of Strategy and Finance, if this worst-case scenario becomes a reality, this year’s growth rate could drop by 0.69%. Since the Ministry of Strategy and Finance projected the 2025 economic growth rate at 1.5% in March this year, this means that a tariff bomb could see the rate drop to 0.8%.
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Korea faces fall in exports, growth risks if U.S. tariffs escalate

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