South Korea’s Economic Growth Stalls Amid Tariffs and Political Turmoil

South Korea’s economy showed minimal growth last quarter as global trade risks and weak domestic demand continued to weigh on Asia’s fourth-largest economy, according to a Reuters poll of economists. The country is battling its worst political crisis in decades, marked by the impeachment of the president, which has severely hit consumer sentiment. Adding to the pressure, U.S. President Donald Trump’s significant tariffs on key exports have threatened South Korea’s vital auto shipments to the United States, a core component of its export-driven economy.

The Reuters poll, conducted between April 15-21, showed South Korea’s gross domestic product (GDP) likely grew just 0.1% quarter-on-quarter, matching the stagnant pace of the previous two quarters. Economists’ forecasts ranged from -0.2% to 0.5%, highlighting the uncertainty caused by ongoing trade tensions and softening exports. If these forecasts are accurate, it would mark the longest period of near-zero growth in decades for South Korea.

The Bank of Korea (BOK) recently warned that the economy may have even contracted in the first quarter of 2025, with official GDP figures set to be released on April 24. On an annual basis, the economy likely expanded by just 0.1%, sharply down from 1.2% in the prior quarter. Separate projections expect South Korea’s growth to average only 1.3% this year, below the BOK’s 1.5% outlook.

Pressure for a rate cut has increased as growth prospects dim, but the BOK has kept its key rate unchanged at 2.75% to support the Korean won, which recently hit a 16-year low. Economists expect potential rate cuts later this year to help bolster the slowing economy.