South Korean economy remains subdued amid weak domestic demand, tariff quandary

ANKARA

The South Korean economy remains in doldrums, taking a hit from weak domestic demand and worsening external uncertainties stemming from the US' "aggressive" tariff policy, among other factors, a state-run think tank said Tuesday.

"The Korean economy remains at a similarly subdued level as in the previous month. Construction remains depressed, while manufacturing is experiencing a downturn, dampening production growth," Seoul-based Yonhap News reported, citing the latest report by the Korea Development Institute (KDI).

In a monthly economic assessment report, the KDI noted that despite strong chip sales in the global market, Seoul's overall exports to Washington weakened, particularly in such sectors as vehicles affected by the US' aggressive tariff policy, resulting in slower growth in manufacturing production.

"While consumer sentiment is on the mend, pointing to a possible improvement in domestic demand conditions, trade-related uncertainty remains elevated with the expiry of the U.S.' mutual tariff suspension approaching," it added.

In June, South Korea's exports rose 4.3% from a year earlier to $59.8 billion due to a strong global demand for semiconductors.

But exports to the US slid 0.5% to $11.24 billion amid sweeping tariff measures imposed by Donald Trump administration.

The country also logged a 1.1% one-month decline in Industrial production in May, continuing its downward trend for a second month.

Facility investment also dropped 4.7% over the same period, marking three months of decline.

Trump began imposing reciprocal tariffs on partner nations in April, including 25% duties on South Korean goods, though the new tariff scheme was paused shortly afterward to allow for bilateral negotiations until July 8.

He announced on late Sunday that his administration will impose a 25% tariff on all South Korean products starting on Aug. 1.

* Writing by Aamir Latif