South Korea's Factory Activity Hits 2.5-Year Low Amid US Tariffs: PMI

South Korea's factory activity contracted at the fastest rate in 31 months in April, as demand fell due to US President Donald Trump's sweeping tariffs, while firms became the most pessimistic since the pandemic, according to a private-sector survey released on Friday (May 2).

The survey stood directly opposite South Korean positive trade data released the day before because of strong semiconductor market demand. Even so the data indicated tariffs began creating losses for the core automotive sector of South Korea.

According to S&P Global reports the April Purchasing Managers Index (PMI) revealed a manufacturer sector drop to 47.5 from its March value of 49.1 in the fourth-largest Asian economy.

Business activity registered its lowest level since September 2022 marking the third successive month below 50 which serves as the threshold between growth and decline.

Sub-indices revealed that output and new orders fell to their lowest levels since June 2023.

And, in a sign of how Trump's tariff policies are upending some of the world's most trade-dependent economies, new export orders fell for the first time since October 2024, marking the largest drop in 22 months.

"According to manufacturers, challenging domestic economic conditions and the impact of US tariffs weighed heavily on the sector, stifling new product launches and sales in both domestic and export markets," said Usamah Bhatti, economist at S&P Global Market Intelligence.

Last week, South Korea announced that it had reached an agreement with the United States to develop a trade package aimed at eliminating new US tariffs before the pause on reciprocal tariffs, including 25% duties on South Korea, is lifted in July following a first round of trade negotiations.

South Korean manufacturers' outlook for the coming year shifted pessimistically for the first time in December, as domestic political uncertainty grew as a result of former President Yoon Suk Yeol's failed attempt to declare martial law.

The level of pessimism was the highest since June 2020. Excluding the COVID-19 pandemic period, it was the worst in survey history since April 2012.

Near-term indicators of input purchases and backlogs of work fell the most in 31 months and 26 months, respectively, while job cuts were the most significant since September 2020.