Lee Chang-yong, Governor of the Bank of Korea, said on the 25th (local time) regarding U.S. President Donald Trump's tariff policy, "If negotiations between the United States and China do not work out, the economic expense will be very large even if the reciprocal tariff waiver for other countries is postponed further."
This means that even if major countries, including South Korea, negotiate reciprocal tariffs with the United States, the uncertainty about the global economy remains high unless the trade war between the U.S. and China is resolved.
At a press briefing held near Washington, D.C., Governor Lee noted, regarding the Group of 20 (G20) Central Bank Governors' Meeting and the International Monetary Fund (IMF) Spring Meeting, "The first core message I received was uncertainty."
Governor Lee said, "Many countries are holding tariff negotiations, and there was a lot of discussion about whether the dollar or the financial markets will stabilize again if the negotiations calm down or whether it will take a long time."
He added, "There was a lot of pressure for the U.S. and China to negotiate and quickly resolve the issues."
The Trump administration announced reciprocal tariffs against countries worldwide on the 2nd. Subsequently, most reciprocal tariffs were deferred for 90 days, but retaliatory tariffs were applied at over 100% against China, essentially waging a trade war.
Governor Lee stated, "Since China has played the role of the world's factory for quite a while, there aren't many goods that can be traded without touching China," adding, "Realistically, it is difficult to speak of trade while excluding China, as the world is heavily interconnected with China."
He continued, "Among the scenarios discussed at the meeting, there was little difference in growth rates between the scenario where reciprocal tariffs do not disappear and the scenario where tariffs on other countries, excluding China, disappear after 90 days," explaining, "This is because the tariffs on China have significantly increased, and the retaliation by China offset the exempt effect of tariffs on other countries."
Regarding the outlook for U.S.-China negotiations, Governor Lee said, "In any case, an agreement must be reached between the U.S. and China for the world to feel comfortable," adding, "This is more of a wish than a forecast."
Regarding the impact of tariffs on the South Korean economy, Governor Lee noted that imposing retaliatory tariffs is not realistic given South Korea's trade structure, saying, "Thus, the impact on the economy will be greater than on prices," and added, "How to conduct currency policy will be reconsidered by changing the May economic forecast."
On the foreign assessment of the South Korean situation, he said, "While it is said that Korea will be very difficult due to the trade war, Korean corporations are evaluated to move more flexibly and quickly compared to other Asian countries with high export dependence," and noted, "While it is considered difficult, there was also a positive aspect in that they do not view it very negatively."
Additionally, Governor Lee commented on the discussion held the day before at the "Korea-U.S. 2+2 Trade Consultation," regarding Treasury Secretary Scott Vestant's agreement for the two countries' treasury authorities to discuss exchange rate policies separately, saying, "There is a possibility of misunderstanding by not looking at the cause of why the Korean currency has depreciated so much," and added, "It seems we need to listen to what the U.S. side will say." He also remarked that "the direct conversation between the U.S. Treasury and our Ministry of Economy and Finance is more positive than speaking with those who only think of politicians or trade."
During the Korea-U.S. 2+2 meeting attended by Deputy Prime Minister Choi Sang-mok and Minister of Trade, Industry and Energy Ahn Duk-geun, the two countries agreed to have separate discussions regarding exchange rate policies between the Ministry of Economy and Finance and the U.S. Treasury.