Washington: South Korea's top central banker has said global trade tensions sparked by the United States' sweeping tariff policy are a major headwind for the country's export-driven economy, and the issue will likely accelerate its efforts to diversify supply chains. Bank of Korea (BOK) Gov. Rhee Chang-yong made the assessment during an interview with CNBC in Washington, where he is attending meetings of the Group of 20 (G20) finance ministers and central bank chiefs, as well as International Monetary Fund-World Bank Group (IMF-WBG) meetings.
According to Yonhap News Agency, Rhee emphasized the direct and indirect impact of U.S. tariffs on South Korea's economy. He mentioned that sectors such as semiconductor production in Vietnam, car and electronics production in Mexico, and battery production in Canada would be affected. Rhee expressed hope that the trade tensions would dissipate, acknowledging their negative impact on all parties involved.
South Korea has been diversifying its supply chains, especially from China, over recent years. This shift is partly due to growing competition and political issues between the two countries. Rhee noted that the current trade tensions might expedite this diversification process, which he described as a natural movement to improve the supply chain and move up the value chain.
Regarding economic growth, Rhee stated that it is difficult to forecast due to uncertainties surrounding U.S. tariff policies. He mentioned that upcoming tariff talks with the U.S. might provide more clarity on future scenarios. South Korea and the U.S. are scheduled to hold these discussions in Washington, as the U.S. has temporarily delayed the implementation of 25 percent reciprocal tariffs on South Korean imports.
South Korea's real gross domestic product (GDP) saw a contraction of 0.2 percent in the January-March period, according to preliminary data from the BOK. Initially, the BOK anticipated a 1.5 percent growth for the South Korean economy this year, but Rhee later suggested this outlook might be too optimistic and indicated that the central bank would release an adjusted forecast in May.