Donald Trump, President of the United States, AFP Yonhap News
The government has diagnosed that pressure on the Korean economy is increasing for four consecutive months. It particularly emphasized the worsening external environment due to the imposition of tariffs by the U.S.
The Ministry of Economy and Finance announced through the April issue of ‘Recent Economic Trends’ on the 11th, “Our economy is experiencing delays in domestic recovery, including consumption and construction investment, and employment difficulties focusing on vulnerable sectors are persisting.” It stated, “The worsening external conditions due to U.S. tariffs are increasing downward pressure on the economy.”
This month, the government added the expression “worsening external conditions due to U.S. tariffs” to its economic assessment. Cho Sung-jung, Director of Economic Analysis at the Ministry, explained, “Although it is true that the burden on our economy and companies has been somewhat alleviated due to the 90-day tariff deferral, the 10% tariff and item-specific tariffs on steel and automobiles are being applied, so it was expressed as worsening external conditions.”
Following the emergency martial law situation last December, the government initially stated that there was concern about increasing downward risks, but from January, it began to describe the economic situation as “increasing downward pressure.” Nonetheless, the government now believes that the downward pressure has increased more this month compared to the previous month.
As diagnosed by the government, consumption and construction investment have not escaped the slump. Retail sales in February decreased by 2.3% compared to the same month last year. Although sales of durable goods like passenger cars increased by 13.7%, sales of non-durable goods like food and beverages (-7.5%) and semi-durable goods like clothing (-6.8%) all decreased.
The government views a decrease in department store card approval amounts and a decline in the consumer sentiment index in March as negative factors. The actual domestic card approval amount increased by 2.5% year on year, but the increase was smaller than in February (6.8%). The consumer sentiment index was also at 93.4, down from 95.2 in the previous month.
Construction investment in February decreased by 21.0% compared to a year ago, with performances in building (-23.9%) and civil engineering (-11.1%) both declining. The government explained, “The reduction in building permits (-20.3%) is negative for future construction investment, but the 57.5% increase in construction orders compared to January is seen as a positive factor.”
The government diagnosed, “With the worsening trade environment due to major countries’ tariffs, concerns about increased volatility in the international financial market and a slowdown in trade and growth are rising.” The domestic financial market is also fluctuating. Last month, the KOSPI index declined by 2.04% compared to the previous month due to concerns surrounding U.S. reciprocal tariffs. The won-dollar exchange rate at the end of last month also rose by 0.6% to 1,472.9 won compared to the end of the previous month.
On this day, Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, evaluated at the ‘Macroeconomic and Financial Issues Meeting’ (F4 meeting) that despite the U.S. government’s 90-day deferral of reciprocal tariffs, the uncertainty persists due to the deepening U.S.-China tariff dispute and continued item-specific tariffs. He also urged relevant agencies to review situational response plans and strengthen monitoring of markets such as stocks, government bonds, foreign exchange, and funds.