How Will Trump's Protectionist Policies Impact Global Economic Growth?

As South Korea grapples with economic challenges, recent data reveals a divergence in growth compared to the United States. In the third quarter of 2024, South Korea's GDP grew by a mere 0.1%, narrowly avoiding a technical recession, while the U.S. economy expanded by 2.8%, down from 3% in the previous quarter [02d0bda5]. This stark contrast highlights the differing economic trajectories of the two nations.

Despite the sluggish growth, South Korean private consumption increased by 2%, and government consumption rose by 2.4%. In comparison, U.S. personal consumption surged to 3.7%, with federal government spending increasing by 9.7% [02d0bda5]. Overall, South Korea's GDP was 1.5% higher than in Q3 2023, but the Bank of Korea is expected to lower its 2024 GDP forecast from 2.4% to 2.2% due to ongoing economic pressures [02d0bda5].

The waning demand for semiconductors continues to be a critical factor in South Korea's economic slowdown. Exports fell by 0.2% year-on-year in October 2024, despite a headline export increase of 4.6%, which was slower than the previous month. Imports rose by 1.7%, resulting in a trade surplus of $3.2 billion [29de41ec].

Finance Minister Choi Sang-mok announced plans for tighter market oversight during an economy-related ministers' meeting in Seoul on October 28, 2024. This follows the economy's growth of only 0.1% in the July-September quarter, which fell short of expectations [55762eab]. Choi emphasized the need for swift responses to market volatility amid risks from the upcoming U.S. presidential election and ongoing global economic conditions [55762eab].

The Bank of Korea has already cut its key interest rate to 3.25% to stimulate growth, and there are indications that it may revise down its GDP growth forecast due to the weakening export situation [29de41ec][db3da734]. Economists project modest growth of 0.5% for the third quarter of 2024, following a contraction of 0.2% in the second quarter, with the annual growth estimate adjusted to 2.0% from 2.3% [db3da734].

In a recent report, the Korea Institute for International Economic Policy (KIEP) revised its global economic growth outlook for 2025 to 3%, a decrease of 0.2 percentage points from earlier estimates. Concerns are mounting regarding President-elect Donald Trump's proposed tariffs, which could include a minimum of 10% on all imports. These policies are expected to impact global and Chinese economic growth as early as 2025, with the U.S. economy projected to grow by 2.1% and China's growth forecast lowered to 4.1% [3264e290]. The EU's growth outlook has also been revised down to 1.3%, while South Korea's economy is projected to grow by 2% [3264e290].

The KIEP report also highlighted rising protectionism under the Trump administration, with potential U.S. tariffs on China reaching as high as 19.3%. This situation raises concerns about global economic stability amid increasing volatility in financial markets and ongoing U.S.-China trade tensions [875f0988]. South Africa's economic outlook remains challenging, with a projected growth of only 1.1% and a debt-to-GDP ratio that has surged from 23.6% in 2009 to over 74% in 2024 [875f0988].

The Korea Development Institute (KDI) has revised its economic growth forecast for this year from 2.2% to 2.6%, citing a significant increase in semiconductor-centered exports. KDI has urged that South Korea's monetary policy should remain independent of the United States, advocating for proactive interest rate cuts based on local economic conditions [cc518048][7eee07ed].

Experts warn that South Korea risks falling into a 'low-growth trap' exacerbated by low birth rates and a declining working-age population, projected to drop from 70.2% in 2024 to 51.9% by 2050. This demographic shift emphasizes the urgency for structural reforms to enhance growth potential [50fd8f48].

In light of these developments, the government's commitment to tighter market oversight and support for key industries like semiconductors may be crucial in navigating the current economic landscape and mitigating risks associated with global uncertainties. Additionally, the potential for aggressive tariff policies under a Donald Trump presidency adds another layer of complexity to South Korea's export challenges [76f89536].