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South Korea’s economy signed in the first quarter, political turmoil hit consumer sentiment in Asia’s fourth-largest economy, and business concerns rose more than President Donald Trump’s tariffs on exports to the US.
South Korea’s GDP fell 0.2% in the quarter in the first three months of the year, according to data released by the Bank of Korea before the senior minister began trading talks with the Trump administration on Thursday. The economy signed 0.1% from the previous year.
The GDP contraction came as concerns grew about 25% obligations for steel imports from South Korea over US tariffs in the first quarter and the Trump administration’s imposition in mid-March.
The data showed consumers fell 0.1% in the quarter as consumers cut spending amid a political crisis caused by President Yoon Soo-Yeol’s short-lived attempt to impose martial law in December. Yoon was fired from office this month and forced a new presidential election scheduled for June 3rd.
South Korea’s growth outlook has dimmed since Trump imposed a 25% tariff on cars and auto parts this month.
Finance Minister Choi Sang-Mok and Industry Minister Anne Duc Jean were scheduled to meet their American counterparts in Washington later Thursday for negotiations on tariffs. Anne said she aims to reach a speedy agreement on lifting or reducing vehicle obligations.
Vice President Han Duck Saw told the Financial Times last week that South Korea would “not fight back” against Trump’s tariffs, citing its historic debts to Washington.
Han said Seoul would instead seek a “solution that is more advantageous for both.”
South Korea’s customs data issued on Monday suggests that US duties are already affecting, with exports down 5.2% from the previous year in the first 20 days of April. US freight fell by 14.3% and China freight fell by 3.4%.
Similar to the automobile mandate, the US has comprehensively introduced a 10% tariff on imports from South Korea.
The government is preparing an additional WON12TN ($8.4 billion) budget to address tariffs, but economists say it is not enough to completely ease the blow.
The Bank of Korea, which had changed its base rate to 2.75% last week, suggests it will cut interest rates for the upcoming quarter to support slowing growth.
