South Korea’s inflation eases as energy and food prices steady
The country’s trade-dependent economy faces a slew of headwinds, with the Trump administration’s protectionist policies among the most daunting.
SOUTH Korea’s consumer inflation moderated as energy and food prices remained stable, offering confidence to officials who have shifted their policy focus to supporting the economy as Donald Trump’s tariff campaign escalates.
Consumer prices advanced 2 per cent in February from a year earlier, slower than the 2.2 per cent rise in January, the statistics office reported on Thursday (Mar 6). Economists surveyed by Bloomberg had forecast the pace of price growth would ease to 2.1 per cent.
Thursday’s data will be a positive sign for policymakers whose focus is on bolstering economic growth after inflation cooled in the second half of 2024. South Korea’s trade-dependent economy faces a slew of headwinds, with the Trump administration’s protectionist policies among the most daunting.
The Bank of Korea has cut its benchmark interest rate three times since October, when it pivoted policy, as it has viewed inflationary trends staying largely in line with its expectations. Separately, the government is working with the opposition-controlled parliament to put together an extra budget aimed at boosting consumption and other sectors that have struggled.
The export sector faces slower momentum after enjoying a rally led by semiconductors last year. Semiconductor shipments fell 3 per cent from a year earlier in February, marking the first drop since late 2023, as conventional memory-chip prices declined.
The outlook for global trade is also weakening as protectionism rises. The US slapped new tariffs of 25 per cent on most Canadian and Mexican imports and doubled an existing charge on China to 20 per cent earlier this week, marking one of the largest increases in US tariffs since the 1930s. Trump decided on Wednesday to exempt automakers from newly imposed tariffs on Mexico and Canada for one month.
The political turmoil sparked by President Yoon Suk-yeol’s brief imposition of martial law in December continues to cast a cloud over consumer and business sentiment as well. The Constitutional Court is reviewing a parliamentary motion that impeached Yoon and may deliver its verdict within weeks.
Finance Minister and Acting President Choi Sang-mok in the meantime leads the government. In that role he’s been seeking to reassure investors about the outlook for South Korea’s economy. He spoke last week with US Treasury Secretary Scott Bessent in Seoul’s latest bid to win an exemption from tariffs.
Trump’s America First policy has compounded challenges for South Korea by dealing a fresh blow to the won. After finishing 2024 as Asia’s worst-performing currency, the won has been buffeted by Trump’s tariff campaign, raising the possibility of higher consumer prices in coming months as imports become more costly. BLOOMBERG
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