Finance Minister Hong Nam-ki is warning the escalating trade tensions between the U.S. and China could affect the South Korean economy more seriously than previously thought.
"The government will prepare for all possibilities and strive to minimize the impact on the local economy."
The world's two largest economies are South Korea's top two trading partners and together account for nearly 40 percent of the country's total exports.
Given that near 80 percent of Seoul's exports to Beijing are intermediary goods, the Korea International Trade Association says the U.S.-China trade tariffs, including Trump Administration's 25 percent tariff hike on two-hundred billion U.S. dollars worth of Chinese goods this month could pull down South Korea's overall exports by zero.14 percent or more.
Minister Hong said despite South Korea's record foreign currency reserves, volatility in the local financial market and won-dollar exchange rate have increased.
He also vowed to monitor markets closely and take necessary countermeasures if required.
The benchmark KOSPI has fallen to a four-month low and the Korean won has weakened to nearly 1,200 won against the greenback.
To help exporters, the finance minister again called on the National Assembly to pass the extra budget bill as soon as possible, which includes over 900 million dollars in trade related financing and export marketing.
He added the government will continue to diversify South Korea's trading partners and come up with measures to support local exporters in consumer goods and services by June.
Regarding the Trump Administration's announcement to delay its tariff decision on imported cars for six months, he said the government will continue all outreach efforts and help strengthen the competitiveness of South Korean automakers.
Kim Hyesung, Arirang News.