U.S. President Donald Trump’s announcing of reciprocal tariffs on imports in a reversal of long-standing free trade has roiled the global financial markets, not only in the United States, but also in the EU and Asia.
Trump’s back-and-forth on tariffs had caused the wildest swings on Wall Street since the Covid pandemic of 2020.
President Trump has taken steps to reshore U.S. manufacturing from abroad as part of his election campaign catchphrase “Make America Great Again.”
Now, the specter of a recession has emerged as a strong possibility, with the value of the dollar plunging and U.S. Treasury yields rising.
Against that background, the U.S. administration announced a pause for imposing steep reciprocal tariffs for most countries, except China, for 90 days.
The latest step has forced many countries, including Korea, to scramble and hold negotiations for lower tariffs.
DPM-Minister Choi Sang-mok of the Ministry of Economy and Finance, Korea’s top economic team head, and Minister Ahn Deok-geun of the Ministry of Trade, Industry and Energy are soon to travel to the United States to hold negotiations for lower tariffs than the 25 percent level announced earlier.
DPM Choi is scheduled to meet with U.S. Treasury Secretary Scott Bessett while attending the G20 Finance Ministers and Central Bank Governors’ Meeting, to be held in Washington DC from April 23-24.
Acting President Han Duck-soo held phone conversations with U.S. President Trump on April 8.
Acting President Han said President Trump instructed his administration to hold negotiations with its closest allies and trading partners, including Korea and Japan, for lower tariffs.
During the phone conversation, the two discussed issues such as Korea’s trade surplus, tariffs, shipbuilding industry, Korea’s purchase of large amounts of LNG from Alaska and the provision of costs for military protection of Korea.
DPM Choi to Lead Korean Delegation to 58th ADB Annual Meeting in 2025
The 58th Annual Meeting of the ADB Board of Governors will take place in Milan, Italy, from May 4 to 7, bringing together about 5,000 financial policymakers, finance and economic planning ministers.
It is the first time Italy is hosting the ADB Annual Meeting, and will be the first ADB Annual Meeting in Europe in almost a decade.
Deputy Prime Minister and Minister Choi Sang-mok of the Ministry of Economy and Finance (MOEF) will head a Korean delegation to the upcoming ADB Annual Meetings.
The delegates include the governor of the Bank of Korea and heads and representatives of commercial banks, including Shinhan Financial Group, Kookmin Financial Group, Hana Financial Group, NH Financial Group, Woori Bank, Korea Development Bank, IBK, and Korea Eximbank as well as representatives of other financial institutions and the financial industry.
The annual meeting, to be held under the theme “Sharing Experience, Building Tomorrow,” is a key opportunity for Governors from ADB’s 68 members to consider development issues and challenges facing Asia and the Pacific.
Several thousand participants, including finance ministers, central bank governors, senior government officials, members of the private sector, representatives of international organizations, civil society, and the media regularly join the meeting.
Supplementary Budget Proposal for Wildfire Response and Trade and AI Competitiveness
The government approved the First Supplementary Budget Proposal for 2025 at a Cabinet meeting on April 18 to support wildfire response efforts and enhance trade and AI competitiveness. The budget proposal is scheduled to be submitted to the National Assembly on April 22 for final approval.
In light of the recent massive wildfires in the Yeongnam region — resulting in the worst damage on record — it is imperative to secure fiscal resources for swift recovery efforts while also making proactive investments to reinforce the government’s capacity for disaster and emergency response.
In addition, unprecedented tariff shocks are raising serious concerns over potential damage to Korean industries and enterprises, while global competition for leadership in cutting-edge technologies continues to intensify.
In this context, it is essential to provide support measures to alleviate the burden on export-oriented businesses affected by tariffs and to shore up the competitiveness of strategic high-tech industries such as AI and semiconductors.
As the delayed recovery in domestic demand has exacerbated the difficulties faced by low-income households and small business owners, it is critical to implement measures aimed at easing the financial burden on small businesses and providing targeted support to ensure the livelihood stability of vulnerable populations.
Govt. Will Strengthen Market Monitoring System in Response to Financial Market Volatility
On April 8, Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok held a Meeting on Macroeconomic and Financial Issues at the Korea Federation of Banks building.
Attendees included the Governor of the Bank of Korea, the Chairman of the Financial Services Commission, and the Chairman of the Financial Supervisory Service.
They reviewed domestic and international financial and foreign exchange (FX) market trends following last weekend and discuss future plans.
In the wake of the U.S. government’s announcement of reciprocal tariff measures on April 3, global financial markets have seen heightened risk aversion, with stock markets in the U.S. Europe, and Asia all sharply falling, and significant fluctuations in the value of various currencies against the U.S. dollar, leading to a marked increase in volatility.
The domestic stock market also saw an expanded decline, moving in tandem with the global stock market downturn.
While the domestic bond and money markets have remained generally stable, they continue to require close monitoring.
The meeting participants assessed that, in the current situation, external factors are driving the volatility in the financial markets more than domestic factors.
As the volatility in the domestic financial and FX markets is likely to persist for the time being, they decided to meticulously monitor the market situation with heightened vigilance, centered around the F4 meetings.
Furthermore, DPM Choi called on relevant agencies to closely analyze the impact of changes in the global trade environment on major countries’ growth, inflation, and monetary policies, their policy responses and the potential ripple effects on the domestic economy.
He further urged them to continuously review and prepare contingency plans to ensure that market stabilization measures can be promptly implemented if necessary.
Current Economic Situation
In February 2025, industrial and services production, retail sales, facilities and construction investments all increased.
The entire industrial production moved up (+0.6% m-o-m, +1.2% y-o-y), as production rose in the industrial (+1.0% m-o-m, +7.0% y-o-y), services (+0.5% m-o-m, +0.8% y-o-y), and construction (+1.5% m-o-m, -21.0% y-o-y) sectors.
Retail sales (+1.5% m-o-m, -2.3% y-o-y), facilities investment (+18.7% m-o-m, +7.7% y-o-y) and construction investment (+1.5% m-o-m, -21.0% y-o-y) all increased.
Exports in March 2025 grew by 3.1% year-over-year for a second consecutive monthly increase. Average daily exports also surged by 5.5% in March compared to the same month of last year.
The consumer sentiment index (CSI) in March fell by 1.8 points month-on-month to 93.4. Although the composite business sentiment index (CBSI) increased by 1.4 points to 86.7, the CBSI outlook for April dropped by 2.4 points to 85.6.
Both the cyclical indicator of the coincident composite index and the cyclical indicator of the leading composite index for February went up by 0.1 points respectively.
In March, the increase in the number of employed persons widened and consumer price growth rose at a faster pace.
The number of employed persons grew by 193,000 compared to the same month last year, and the unemployment rate edged up by 3.1% from a year ago.
The year-on-year consumer price index (CPI) climbed to 2.1% due to increases in processed food and public service prices, despite a slowdown in price increases of agricultural, livestock, fisheries and petroleum products.
The CPI excluding the food and energy sectors rose by 1.9%.
In March, stock prices went down, Korean Treasury Bond yields fell and the Korean won weakened. In February, housing prices (-0.06%, m-o-m) and Jeonse prices all moved down (-0.01%, m-o-m).
Recently, the Korean economy has faced mounting downward pressure, as the recovery of domestic demand — particularly in consumption and construction investment — remains sluggish, while employment challenges persist in vulnerable sectors.
These difficulties have been further compounded by deteriorating external conditions stemming from the imposition of tariffs
by the United States.
The global economy is facing heightened concerns over increased volatility in global financial markets and a slowdown in trade and growth, primarily due to the worsening trade environment following tariff impositions by major economies.
The government is taking all-out efforts to respond to trade risks by promptly implementing an essential supplementary budget to support Korean companies affected by U.S. tariffs and to strengthen industrial competitiveness.
It is also continuing to take measures to reinforce and revitalize the real economy, including providing support for job creation, construction, and small businesses.
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