As the effects of the tariff from the United States become pronounced, major sectors such as automobiles and semiconductors are experiencing simultaneous sluggishness, raising concerns about an economic slowdown. Production, consumption, and investment have all declined, leading to the re-emergence of 'triple minus' after three months. There are growing worries that the impact of the tariffs in the second half of the year may impose structural burdens on export and investment flows.
According to the 'April industrial activity trends' report released by the Statistics Korea on the 30th, the total industrial production index for last month was 113.5 (2020=100), down 0.8% from the previous month. This marks the largest decline since January (-1.6%). Production decreased across all institutional sectors, including mining and manufacturing (-0.9%), construction (-0.7%), and public administration (-6.3%). The production in the service sector also declined by 0.1%, with poor performance in financial and insurance services (-1.2%) and professional, scientific, and technical services (-3.6%).
The decrease in production was significantly influenced by the sluggishness of the manufacturing sector, which saw a production decline of 1.6% compared to the previous month. Among these, automobile production fell by 4.2%, showing a contrasting trend to the previous month (3.3% increase). Lee Do-won, Deputy Director General of Economic Trends Statistics at Statistics Korea, noted that 'in the case of automobiles, the electric vehicle factory of Hyundai Motor Group in Georgia, USA, began full operations in March, and the mixed effects of tariffs seem to have impacted the decrease in production focused on eco-friendly vehicles and specially purpose-built finished vehicles.'
Semiconductor production also fell by 2.9%. After a 'flash rebound' of 13.3% in March, it turned to a decline in just a month. The decrease was mainly observed in the production of memory products such as DRAM and flash memory. Analysts suggest that external uncertainties, including export controls to China and tariff issues, have had an effect. The Deputy Director General explained, 'Semiconductors recorded the highest production ever last month, thus this month's decline had a base effect.'
Consumption decreased by 0.9% compared to the previous month. Sales of durable goods such as communication devices and computers (-1.4%), semi-durable goods like clothing and bags (-2.0%), and non-durable goods including food, beverages, and pharmaceuticals (-0.3%) all declined, marking a two-month consecutive decrease following March's (-1.0%).
Facility investment also decreased by 0.4%. While investments grew in the transport equipment sector, which includes automobiles (9.9%), they shrank in machinery used for semiconductor manufacturing (-4.5%), dragging down the overall trend. Construction output fell by 0.7% due to a contraction in the buildings sector, failing to maintain the rebound seen in the previous month. Construction orders also decreased by 17.5% compared to the same month last year, the largest drop in 15 months.
Cho Seong-jung, Director of the Economic Analysis Division at the Ministry of Economy and Finance, stated that 'tariffs and trade uncertainties may have influenced corporate sentiment, affecting the flow of facility investment,' and added, 'We expect the indicators of consumer sentiment to be reflected starting in May.' However, he mentioned, 'External factors such as tariffs remain highly uncertain, so we need to watch if the recovery trend leads to actual economic improvement.'
In fact, according to the Consumer Trend Survey released by the Bank of Korea, the consumer sentiment index (CCSI) for this month was 101.8, up 8.0 points from the previous month. This is the largest increase in 4 years and 7 months since October 2020 (+12.3 points). The business survey index (BSI) also recorded 90.7, up 2.8 points from the previous month.
Director Cho noted, 'Consumption is laying a recovery foundation as high inflation and high interest rates gradually ease, and the recent psychological rebound trend may lead to actual demand.' However, he added, 'The trends until April are still under pressure from external variables such as tariffs and export conditions.'
The government is closely monitoring the impact of U.S. tariff policies on future export and investment flows. Reuters recently reported that 'major global corporations have suffered losses exceeding $34 billion (approximately 46 trillion won) due to the high tariff policies of the Trump administration.'
European companies like Volvo, as well as U.S. firms such as Walmart and United Airlines, have either withdrawn their earnings guidance or announced impending price increases, while the number of companies listed on the Nikkei 225 index mentioning tariffs has surged from 12 to 58 in just one quarter. Given Korea's export structure, focused on semiconductors and automobiles, expectations arise that it will be difficult to remain free from uncertainties regarding performance due to tariffs in the second half of the year.
The government has stated its commitment to respond to trade risks and invigorate domestic demand. It plans to expedite the implementation of a supplementary budget (13.8 trillion won) aimed at minimizing domestic corporate damage caused by tariffs, enhancing artificial intelligence (AI) competitiveness, and providing support for livelihoods.
The government has expressed its commitment to responding to trade risks and boosting domestic consumption. The supplementary budget of 13.8 trillion won includes measures to minimize corporate damage due to tariffs, enhance artificial intelligence (AI) competitiveness, and support livelihoods. A Ministry of Economy and Finance official stated, 'We will minimize the damage to domestic corporations due to tariffs,' and added, 'We will continuously strengthen the recovery trend in economic sentiment and devise customized response measures for various factors contributing to the sluggish domestic demand.'