Trump’s economic shockwave: Insights from a former world bank and pension economist

U.S. President Donald Trump’s tariff policies are increasingly burdening market participants. Earlier this year, some argued that his trade policies were mere bluffs, but such claims have largely faded. Volatility is rising across asset markets, including stocks, real estate, and cryptocurrencies.   

In a recent interview with Money Today, Kang Min-Joo, Senior Economist at ING—who previously led investment research at the World Bank’s Washington headquarters and the National Pension Service (NPS)—stated that Trump’s tariffs are having a greater-than-expected impact on markets. She noted that even Europe, which has long prioritised fiscal stability, has been compelled to inject liquidity into its economy as a result.   

However, she maintained her view that Trump’s tariffs are primarily a negotiation strategy. Kang stated, “While Asian countries like South Korea and Japan have not yet been directly targeted by Trump’s tariff policies, unlike China, it is only a matter of time.” She added, “Countries already in the tariff crosshairs have either announced retaliatory measures or are preparing countermeasures, which will ultimately harm the global economy.”   

She suggested that a tailored global tariff framework is likely to be announced in April. However, since it is primarily a bargaining chip, she expects the details to remain vague.   

Despite the ongoing negative outlook, Kang pointed out that opportunities still exist. Since the primary goal of Trump’s tariff policies is to bolster the U.S. market, the administration is unlikely to restrict foreign direct investment (FDI) into the country. Some U.S. industries that struggle with domestic manufacturing or are not desirable to produce locally could benefit.   

Kang identified the semiconductor and defence industries as potential beneficiaries. She particularly noted that the semiconductor sector has shifted from being a cyclical industry to one driven by strategic investment. This shift has been accelerated by China’s introduction of DeepSeek, which has challenged U.S. dominance in artificial intelligence (AI). In response, President Trump is expected to ramp up investments to maintain America’s technological edge.   

On the other hand, Kang had a less favourable outlook for the automobile and steel/metals industries. If automobile production increases in the U.S., South Korean manufacturers could lose export competitiveness. Meanwhile, outside the U.S., they will face stiff competition from low-cost Chinese electric vehicles.   

She noted, “The issue of excess supply from China in the steel and metals sector remains unresolved.” However, she added, “If companies can successfully differentiate themselves through high-value-added products, they may be able to offset some of the negative impact.”   

U.S. Economic Growth Likely to Slow – South Korea’s GDP Forecast at 1.3% in 2025   

Since the COVID-19 pandemic, the U.S. has experienced standout economic growth compared to other major economies. However, this momentum is expected to slow from next year. Kang attributed this to tariff policies increasing costs for American consumers, a slower pace of interest rate cuts compared to other countries, and weakening consumption, investment, and employment.   

She noted, “Economic burdens are growing for all but the top 20% of U.S. households. Up until January, U.S. consumer sentiment was the strongest globally, but in February, the University of Michigan’s U.S. Consumer Sentiment Index fell to its lowest level since November 2023.”  

She warned that the U.S. 10-year Treasury yield could approach 5%, which would raise corporate borrowing costs and slow investment. She also highlighted that ongoing federal government job cuts could negatively impact the labour market.   

Kang also reaffirmed ING’s forecast for South Korea’s economic growth at 1.3% this year, lower than the Bank of Korea’s projection of 1.5%. This is due to delays in implementing the supplementary budget. Kang explained, “South Korea’s unemployment rate fell from 3.7% in December to 2.9% in January, but much of this decline was driven by public sector jobs, indicating that the government has been injecting significant funds into the market. However, a more fundamental stimulus plan is needed to address persistent low growth driven by structural issues.”   

The exchange rate between the Korean won and the U.S. dollar is expected to rise to around KRW 1,475 in the second quarter due to domestic political uncertainties and capital outflows. However, in the second half of the year, investor funds are likely to return to the domestic asset market, stabilising the rate in the KRW 1,400 range.   

As for the Bank of Japan, rate hikes are expected to continue this year. The central bank is actively communicating with the market, and the likelihood of a recurrence of the yen carry trade unwinding seen last August is low. Kang also noted that the current market volatility is unfavourable for carry trades.   

Regarding China, which remains a focal point in global markets this year, Kang believes its economic recovery will be limited. She emphasised that the real estate market crisis in China is a more urgent issue than U.S. tariff policies.  

Originally published in Money Today: Opens in a new tabhttps://news.mt.co.kr/mtview.php?no=2025031214352253521