Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Korea braces for possibility of Trump weaponizing dollar after tariffs
U.S. President Donald Trump addresses a joint session of the U.S. Congress at the Capitol in Washington, Tuesday (local time). He spotlighted Korea as a country with unfair tariffs against American products during his speech. EPA-Yonhap
By Yi Whan-woo
Seoul expected to face pressure to increase won value amid record US trade surplus
Korea should be ready for the possibility of U.S. President Donald Trump using the dollar as another tool to pressure major trading partners, in addition to tariffs, under his escalating trade war, analysts said Thursday.
They said it was just a matter of time for Korea to be targeted amid the U.S. tariffs plan, noting Trump spotlighted its Asian ally as a country with unfair tariffs against American products, along with China. Including Canada and Mexico, China was one of the countries slapped with higher taxes on goods sold to the U.S. under Trump’s second term.
“China’s average tariff on our products is twice what we charge them, and South Korea’s average tariff is four times higher,” Trump said in a speech to a joint session of U.S. Congress on Tuesday (local time).
Under the circumstances, analysts said Trump could “weaponize” the U.S. dollar if the tariff plan is deemed insufficient to safeguard the American manufacturing industry from countries with better cost-competitiveness.
Trump has told the leaders of Japan and China that they cannot continue to reduce the value of their currencies, as doing so would be unfair to the U.S.
In addition, the U.S. Department of the Treasury has been looking into currency manipulation involving its trading partners. The department will carry out its study through April.
“These actions taken by the Trump administration suggest that the U.S. is linking currency and tariffs for the sake of U.S. interests,” Shinhan Securities analyst Kim Chan-hee said.
“Korea has a high chance of becoming a U.S. target considering it is ranked in the top 10 among countries with a trade surplus with the U.S., while the value of the Korean won is depreciating against the U.S. dollar,” Kim said.
Korea posted its largest-ever trade surplus of $55.6 billion with the U.S. in 2024, after marking an increase for five straight years. The U.S. recorded its eighth-largest trade deficit with Korea, after China, Mexico, Vietnam, Germany, Japan, Canada and Ireland.
In terms of exchange rate, the won has become weaker and is traded at the 1,400 level per dollar, which market observers say is becoming a “new normal.”
Cars are parked for export near a port in Pyeongtaek, Gyeonggi Province, Feb. 19. Yonhap
Park Sang-hyun, an iM Securities analyst, said “there is a high likelihood of the U.S. using currency to press countries with a significant trade surplus if they are not pressed solely by tariffs.”
Asked about possible measures to counter a possible U.S. “weaponization” of tariffs and currency, an analyst suggested buying more goods from the U.S.
“The Trump administration is most concerned about protecting plant workers, many of them being his dire supporters,” said Min Kyung-won, a researcher at Woori Bank. "It can also be a good idea for our government to determine which American goods that are not currently sold in Korea would potentially have high demand in the future.”
Shin Se-don, a professor emeritus of economics at Sookmyung Women's University, voiced a similar view, saying “There is nothing much we can do concerning currency and monetary policies.”
“A weaker won is related to a stronger dollar — an external factor that remains out of the government’s control,” Shin said. “And I would disagree if the monetary policymakers deliberately adjust the benchmark interest rate and take other measures in order to comply with the U.S. demand.”
He also said the solution lies in understanding the core interest of the U.S. in a possible tariff-currency linkage, which is to buy more U.S. goods and help its workers.