South Korea’s Factory Output Drops in January Amid U.S. Tariff Concerns

South Korea’s industrial production declined in January, highlighting growing economic uncertainty fueled by U.S. tariffs and global trade tensions. According to government data released Tuesday, factory output fell 2.3% month-on-month, reversing December’s 3.9% gain. The decline was smaller than the 3.1% drop predicted in a Reuters poll.

Electronics and semiconductor-related industries were hit hard. Production of electronic components, including display panels, plunged 8.1%, while semiconductor assembly machinery dropped 7.7%. The all-industry production index also fell 2.7%, with services sector output slipping 0.9%.

The finance ministry attributed the weak performance to external uncertainties, fewer working days, and an unfavorable base effect. Meanwhile, facility investment plummeted 14.2% due to reduced imports of semiconductor machinery and transport equipment. Retail sales also declined by 0.6%.

Adding to concerns, U.S. President Donald Trump confirmed that 25% tariffs on Canada and Mexico would take effect Tuesday, with reciprocal tariffs beginning April 2. Although the U.S.-Korea Free Trade Agreement (FTA) exempts many goods, Trump’s global steel and aluminum tariffs could impact South Korea’s exports.

In February, South Korea’s exports struggled, with semiconductor shipments ending a 15-month growth streak due to falling memory-chip prices.

As a key global exporter, South Korea faces mounting pressure from shifting trade policies and weakening demand, raising concerns over future economic stability.