Trump tariffs to hit South Korean economic growth and inflation
US President Donald Trump’s sweeping tariff policy is expected to put downward pressure on South Korea’s economic growth and inflation, though the impact on the local financial market is expected to be limited, according to the Bank of Korea (BOK).
The BOK released this assessment in its latest biannual monetary policy report, published a day after the United States imposed 25 percent tariffs on steel and aluminum imports from all countries.
Washington also plans to introduce “reciprocal tariffs” on April 2 — new levies on US imports to match tariffs imposed by other countries on American goods. This move is expected to further escalate the ongoing trade war, heightening global market uncertainty, according to Yonhap news agency.
“The tariff policy is expected to reduce South Korea’s exports to the US and other countries amid slowing global trade. It could also weaken investor sentiment due to increased uncertainties in the trade environment, which would put downward pressure on economic growth and inflation,” the report stated.
The BOK forecasts that South Korea’s economy will grow by 1.5 percent in 2025 and 1.8 percent in 2026. However, under a worst-case scenario involving intensifying trade conflicts, South Korea’s gross domestic product (GDP) growth could decline by 0.1 percentage point in 2025 and 0.4 percentage point in 2026 from these baseline projections.
“We are maintaining our baseline forecast for now, but the situation is evolving rapidly. It’s too early to decide whether to revise the growth forecast. We will continue to monitor the developments closely,” said Deputy Governor Park Jong-woo.
The report also noted that Trump’s tariffs are expected to have a limited impact on inflation this year. However, slower economic growth in 2026 could lead to greater downward pressure on prices. The central bank previously forecast consumer prices to grow by 1.9 percent annually in both 2025 and 2026.
Regarding the financial market, the BOK stated that Trump’s tariff policy is likely to have a “limited impact” on South Korea’s stock market and long-term interest rates compared to his first term in office.
“Uncertainties remain high, and market participants are wary of the issue. It is important to stay vigilant for increased market volatility as US policy unfolds,” the report added.
