BOK Chief: Trump’s trade policies pose greater risk to S.Korea than marital law fiasco
South Korea faces greater economic risks from US President-elect Donald Trump’s trade policies than from its own political turbulence following the martial law imposition, Bank of Korea (BOK) Governor Rhee Chang-yong told the Financial Times on Friday.
“There is a lot of uncertainty … But compared with domestic factors, the external factors are giving us a lot more uncertainty at the moment,” Rhee said, pointing to Trump’s tariff threats as a key driver behind the central bank’s recent decision to downgrade its economic growth forecasts.
The BOK has lowered its 2024 growth outlook to 2.2 per cent from 2.4 per cent and its 2025 projection by 0.2 percentage points to 1.9 per cent. Slowing export growth and Trump’s proposed trade policies are cited as major contributors to this revision.
Rhee’s comments come amid political upheaval at home. On Tuesday, President Yoon Suk Yeol declared martial law in a surprise late-night address, only for the National Assembly to reject it hours later. The opposition has since filed a motion to impeach Yoon, with a vote expected on Saturday.
The domestic turmoil has led to a sharp depreciation of the Korean won and a stock market downturn, fueled by heavy foreign selling. While acknowledging that the political crisis may delay critical structural reforms, Rhee noted its broader economic impact is likely to remain limited.
To stabilise the markets, the government has pledged “unlimited liquidity,” and the BOK has begun repurchase (repo) operations to support financial institutions. Last week, the central bank made an unexpected back-to-back policy rate cut, prioritising economic recovery over other policy goals.
Finance Minister Choi Sang-mok and other officials have been working to reassure foreign investors, emphasising South Korea’s economic fundamentals, democratic resilience, and rules-based governance.
Despite the challenges, Rhee stressed that South Korea’s economy remains robust, but navigating uncertainties, both domestic and international, will be crucial in the months ahead.
Attribution: Yonhap
