South Korea Manufacturing PMI Falls in July Amid U.S. Tariff Uncertainty

South Korea’s factory activity continued to shrink in July, marking the sixth consecutive month of contraction as global trade tensions weighed on production and new orders. According to S&P Global’s Purchasing Managers’ Index (PMI), the gauge for Asia’s fourth-largest economy slipped to 48.0 in July from 48.7 in June, remaining below the 50 threshold that separates growth from decline.

Economist Usamah Bhatti of S&P Global Market Intelligence noted that the latest PMI data reflected a “stronger deterioration in operating conditions,” driven by steeper declines in both output and new orders. The report cited anecdotal evidence pointing to domestic economic weakness compounded by uncertainty over U.S. tariff policies.

The survey, conducted between July 10 and July 23, came just before South Korea secured a trade deal with the United States that lowered tariffs to 15% from a previously threatened 25%. Despite the agreement, manufacturers expressed renewed pessimism about the outlook for the year ahead—the first such sentiment shift in three months—citing ongoing concerns about the timing of a domestic recovery and lingering trade risks.

Export demand showed mixed signals, with new export orders contracting at the slowest rate in four months but still declining overall. U.S. and Japanese markets were highlighted as key areas of weakness for South Korean exporters, especially in high-tech sectors like semiconductors and electric vehicle batteries.

The prolonged manufacturing slump underscores broader challenges facing South Korea’s economy, which relies heavily on global trade. Analysts say the latest PMI reading could pressure policymakers to consider additional measures to stabilize growth and support exporters navigating an uncertain international trade environment.