Seoul: The South Korean currency witnessed its most significant drop in over five years against the U.S. dollar on Monday, as the Trump administration's extensive tariff plan and subsequent reactions from China sparked concerns about a global trade war and potential economic downturn. The Korean won was valued at 1,467.8 won per dollar at 3:30 p.m., showing a decline of 33.7 won compared to the previous session.
According to Yonhap News Agency, this marks the most considerable single-day fall since March 19, 2020, when the currency decreased by 40 won during the COVID-19 pandemic. During intraday trading, the Korean won weakened further to a low of 1,471.5 won, reflecting the market's apprehension.
The currency's decline follows former President Donald Trump's announcement to impose "reciprocal" tariffs on imports globally, including a 25 percent duty on South Korean goods set to commence on Wednesday (U.S. time). Additionally, a 10 percent "baseline" tariff on foreign imports took effect starting Saturday, intensifying trade tensions.
In retaliation, Beijing declared a 34 percent tariff on American imports beginning Thursday and promised further retaliatory measures. The escalating trade conflict adversely impacted the local stock market, with the Korea Composite Stock Price Index (KOSPI) dropping 5.57 percent to close at 2,328.20.
Market analysts have cautioned about increased volatility due to uncertainties arising from the tariff policies and the domestic political situation. The Korean won has been hovering near the 1,470 won level against the U.S. dollar, a rate not seen in approximately 16 years since the aftermath of the global financial crisis in March 2009.
Interestingly, the won had surged by the largest margin in about two and a half years against the U.S. dollar on Friday, quoted at 1,434.1 won-the highest level since late February-following the Constitutional Court's decision to remove President Yoon Suk Yeol from office.
Bank of Korea (BOK) Deputy Governor Ryoo Sang-dai expressed concerns during an emergency task force meeting, stating, "Uncertainties surrounding the U.S.' path regarding its tariff policies remain high and such a situation may be prolonged longer than expected."