WASHINGTON, D.C. – July 7: An aide announced a 25% tariff starting on August 1 in a letter signed by U.S. President Donald Trump, announcing a 25% tariff on July 7, 2025 at the Brady press conference in the White House in Washington, D.C., Washington, on July 7, 2025.
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In the first batch of “tariff letters” sent to trading partners, U.S. President Donald Trump targeted two of Asia’s closest U.S. allies: Japan and South Korea – both already bear existing car and steel export taxes.
Additional tariffs will further harm the two export-dependent economies that are struggling with slowing growth, and Japan may stare at a technological recession or two consecutive economic contractions.
Both Japan and South Korea On a quarter-quarter basis, we saw GDP for the first quarter.
Even though South Korea faces 25% tariffs on imports to the United States, the same as Trump promised in April, Japan’s interest rates have risen by 1 percentage point to 25%.
Exports – including services – almost compensated 22% of Japan’s GDP in 2023according to the latest data from the World Bank, 44% of South Korea’s GDP in 2023.
Currently, automobiles and auto parts import 25% tariffs to the United States, while steel and aluminum attract 50% tariffs in most countries.
Automobile is Japan’s largest export to the United States and South Korea’s highest export. So is South Korea The fourth largest steel exporter in the United States According to the U.S. Department of Commerce’s International Trade Administration, 2024.
Japanese Prime Minister Sigru Ispibon It is reported The country “actively seeks opportunities for agreements that benefit both countries while protecting Japan’s national interests.” in May, Ispibon says His country will not accept a transaction that does not remove automatic tariffs.
Norihiro Yamaguchi, a leading Japanese economist at Oxford Economics, said the newly announced tariffs will reduce Japan’s GDP by 0.1 percentage point by the end of 2026.
“Given that the economy has been subjected to high tariffs on automobile and global trade policies with uncertainty, and consumption should not be dismissed,” he told CNBC.
Yamaguchi said Japan’s economy will “grow barely” in the second half of 2025 and the first half of 2026, if not in recession.
The United States is Japan’s largest export market. 21.3 trillion yen (USD 145.76 billion) of goods Arrived in the country in 2024 South Korea exports $127.8 billion worth of goods to the United States In the same year, the United States was regarded as its second largest export market.
Reflecting the “strengthening tariff policy position”, May South Korea From February’s 1.5% forecast, GDP growth is estimated to be nearly half of GDP growth in 2025.
“The recovery of domestic demand has been delayed, and export growth is expected to slow further due to the impact of U.S. tariffs,” Bock said.
Frederic Neumann, chief Asian economist at HSBC, told CNBC that these tariffs would “grow a huge headwind” if Japan and South Korea fail to reach an agreement.
Both Japan and South Korea are already facing weak domestic demand.
Trump said he is willing to “maybe consider adjustments to the letter” if the country is to open up their “to date closed” market
Vishnu Varathan, managing director of Mizuho Securities, said the pressure strategy is taking on both South Korea and Japan.
“The frustration with a more principled and overall attitude towards Japan (covering departmental tariffs) has delayed a deal, which is the source of frustration with U.S. trade negotiators and is crucial to Trump,” he added.
Although Trump did not publicly express his anger towards South Korea, Vallasen said: “It is not difficult to invoke the letter with similar points to Japan.”
Meanwhile, the market seems to be shrugging, currently shrugging. HSBC’s Neumann says Trump’s letter Essentially, within three weeks, the deadline for tariff negotiations was extended.
“Financial markets are striding through the latest news, focusing on negotiations to weaken the possibility of threatened tariffs,” he said.
