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Reckless and flip-flopping tariff policy are having huge negative impact on global economy, especially hitting those economies with exports-dependent heavily, such as South Korea and Japan, which are struggling with the slowdown in growth.
According to the latest data from the World Bank, exports — including services — made up almost 22% of Japan’s GDP in 2023, and 44% of South Korea’s GDP in 2023.
Right now Japan and South Korea are both already bearing the brunt of existing tariffs on auto and steel exports. South Korean imports to the U.S. face 25% tariffs, the same as in April, the rate on Japan has been raised by 1% to 25%. Imports of automobiles and auto parts to the U.S. currently incur a 25% tariff, while steel and aluminum attract a 50% levy on most countries.
Automobiles are Japan’s largest exports to the U.S. and are also among South Korea’s top exports. South Korea was also the fourth-largest exporter of steel to the U.S. in 2024, according to the International Trade Administration under the U.S. Commerce Department.
On the flip side, U.S. is Japan’s largest export market, with 21.3 trillion yen ($145.76 billion) of shipments to the country in 2024, while South Korea exported goods worth $127.8 billion to the U.S. in the same year, and counts the U.S. as its second-largest export market.
Additional tariffs would entail further slowdown in economic growth on these two countries. Both Japan and South Korea are facing sluggish domestic demand, meanwhile first-quarter GDP contracted on a quarter-on-quarter basis, also Japan is likely tipping into a technical recession, along with Bank of Korea in May nearly halved GDP growth estimates for 2025 to 0.8% from February’s projection of 1.5%, which further reflects a more intensified tariff policy stance is having direct and negative spillover effect on economy. Given Japan and South Korea are already suffering from high tariffs on auto and elevated global trade policy uncertainty as well as weak domestic demand, despite both countries are actively seeking the chance of a trade agreement with US, but the outlook is not clear due to the sticking points of negotiations, which will overshadow the future economic growth. In another words, should Japan and South Korea fail to reach a trade deal with the US, these above mentioned tariffs will pose considerable headwinds to growth down the road.Complete digital access to quality Glebors financial topic with expert analysis from industry leaders.
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