Analysts sound alarm on Trump's 'worst-case' tariff move

Korea Herald

03-04-2025

Korean analysts are raising alarms over US President Donald Trump's sweeping new tariff plan, calling it a 'worst-case scenario' that threatens to disrupt Korea's financial markets and economic stability.
The Trump administration on Thursday unveiled its plan to impose a 10 percent universal tariff on all imports to the US, alongside steep "reciprocal" tariffs on about 60 countries with trade surpluses — including a 25 percent levy on South Korean goods.
"Reciprocal tariffs have materialized as the worst-case scenario," said Park Sang-hyun, an analyst at iM Securities, warning that they could deliver a major shock to financial markets while also slowing the US economy and increasing inflationary pressures.
He predicted a substantial and unavoidable blow to Korea's economy. 'From the second quarter onward, slowing exports to the US and ASEAN countries could further drag down domestic growth, making it increasingly likely that economic growth could fall below 1 percent this year,' he said.
Even before the tariff announcement, global investment banks had lowered their forecasts for Korea's economic growth in the first quarter. Nomura slashed its estimate to 0.1 percent from 0.6 percent, while BNP Paribas projected growth of just 0.2 to 0.3 percent.
Jung Yeo-kyung, an analyst at NH Investment & Securities, expects Korea's export recovery to slow further in the second quarter, citing ongoing uncertainties surrounding Trump's tariffs and retaliatory measures from affected countries.
'At this stage, companies are unable to execute investment plans with stability. We expect stable new orders to emerge only after reciprocal tariff negotiations conclude in the second quarter,' she said.
Korea's automobile industry is bracing for a loss of competitiveness, with nation-specific US tariffs raising costs and pressuring exports. Hyundai Motor and its smaller affiliate Kia, which have manufacturing plants in Vietnam, India and Indonesia, will face even higher reciprocal tariff rates than Korea itself.
Meanwhile, the European Union, Brazil, Turkey and Singapore lack production lines for key US-bound sport utility vehicles and Genesis models, limiting their ability to offset supply chain disruptions.
'Unless reciprocal and import tariffs on automobiles are adjusted through country-specific negotiations, increasing US-based production will be inevitable. However, as more production shifts to the US to avoid tariffs, exports from Korean plants to the US will inevitably decline — further weakening Korea's already slipping position in global auto manufacturing, which has fallen from fifth to seventh place,' said Moon Yong-kwon, an analyst at Shinyoung Securities.
Separately, the 25 percent tariff on automobiles announced by Trump on March 26 officially took effect Thursday.
With automobiles ranking as Korea's top export to the US, the impact is expected to be severe. Last year, Korea exported $34.7 billion worth of automobiles to the US, accounting for 49.1 percent of Korea's total global auto exports.