Trump Tariffs Threaten South Korea & Japan Economic Outlook
New tariffs imposed by the U.S. are casting a shadow over the economic prospects of South Korea and Japan. These tariffs, reminiscent of those threatened in April, have been implemented, impacting imports to the U.S.
While South Korea faces a 25% tariff, Japan's rate has edged up to 25%. Both nations, heavily reliant on exports, already experienced GDP contractions in the first quarter.
Impact on Key Industries
The automotive and steel industries, key export sectors, are particularly vulnerable, with existing tariffs of 25% on automobiles and 50% on steel and aluminum.
Japan, heavily dependent on exports, could see a 0.1 percentage point dip in GDP by 2026 due to these tariffs, according to Oxford Economics. Prime Minister Shigeru Ishiba aims for a mutually beneficial agreement that protects Japan's interests, with the removal of auto tariffs being a key demand.
Meanwhile, South Korea, a significant steel exporter, is also bracing for impact. The Bank of Korea has already lowered its GDP growth forecast for 2025, citing the influence of U.S. tariffs on export growth.
Market Reaction
Despite the looming threat, markets remain cautiously optimistic, hoping for negotiated resolutions.
