South Korea Vows to Keep Investing in US ‘Whoever Wins’ Election

Article content

(Bloomberg) — South Korea expects to continue its strong ties with the US regardless of the election outcome next month, the country’s finance minister, Choi Sang-mok, said Thursday.

“Whoever wins this election, Korea and the US are ultimate economic and security partners, so we will continue to invest and cooperate with each other, which is a win-win for both,” Choi said in an interview with Bloomberg in Washington. He cited investments by South Korean companies in American semiconductor and battery plants.

Article content

Yet the American vote — now less than two weeks away — adds to uncertainties weighing on the government in Seoul. Whether Donald Trump or Kamala Harris wins, most South Korean businesses expect trade barriers to rise, making it harder for them to maintain their earnings goals, a survey shows.

Trump, the Republican nominee, has vowed to escalate tariffs against China, a key South Korean trading partner, while Harris seeks higher corporate taxes that could weigh on demand for imports from foreign manufacturers. 

Regarding the former president’s tariff proposals, Choi emphasized that a rules-based global free trade framework is in the best interest of Korea.

Trump has also referred to South Korea as a “money machine” as he reiterated a demand that Seoul shoulder more of the upkeep for American troops stationed on the Korean Peninsula.

The security ties between Washington and Seoul have strengthened since President Yoon Suk Yeol took office in 2022 along with economic relations as China emerged increasingly as a business competitor to South Korea. That has spurred more South Korean investment and production in the US, adding to pressure on the won at a time the Federal Reserve kept its rate high to combat inflation.

Article content

Article content

The won currently trades around 1,380 per dollar, weakening about 15% in the past three years. Choi, visiting the US for the annual meetings of the International Monetary Fund and the World Bank, said the authorities were aware of market concerns that the won has weakened relatively fast compared to other currencies. 

“I am well aware of market concerns that the pace of the won’s movement is relatively faster than that of other currencies,” Choi said. “So we’re closely monitoring market trends while staying alert about currency volatility.”

He added that the dollar’s strength and its greater volatility could mean more turmoil in the global financial markets, and there might be a need of multilateral stabilization efforts. 

Fluctuations in the foreign exchange affect everything from consumer prices to export costs in South Korea as the nation relies heavily on imports for energy, food and raw materials. That keeps the authorities on edge and ready to intervene should it be necessary by drawing on foreign reserves that rank among the biggest in the world.

The outlook for South Korea’s economy grew less optimistic this week after the central bank reported gross domestic product barely expanded last quarter. The 0.1% growth from the previous three-month period came below a pace forecast by economists and reflected a softening export rally at a time interest rates stayed high enough to weigh on private consumption and construction activity at home.

Article content

Exports are the biggest driver of the trade-reliant economy and the Bank of Korea is expected to downgrade its 2024 growth forecast from 2.4% when it meets for a rate decision next month. The bank began its policy pivot earlier this month by cutting its benchmark rate by a quarter-percentage point to 3.25%, citing cooling inflation and property prices.

Economists surveyed by Bloomberg expect a hold in November as the board assesses the impact of its policy shift. The focus on economic momentum is expected to tighten as the bank increasingly cites uncertainties surrounding exports, including conflicts in the Middle East.

—With assistance from Youkyung Lee.

Article content