Korea's economic outlook is becoming increasingly uncertain, driven by both domestic struggles and external risks, particularly the looming threat of Donald Trump's return to the U.S. presidency. According to the latest data from the Bank of Korea (BOK), the Composite Consumer Sentiment Index (CCSI) fell to 100.7 in November, a 1-point drop from the previous month. This index reflects consumer views on the economic situation and indicates growing concerns about the country's financial future.

The sharpest drop in the index was seen in the future economic outlook component, which fell by 7 points to 74 — its lowest level since July 2022. This decline reflects growing concerns about the country's economic trajectory, with many linking the pessimism to the unpredictable policies of the Trump's administration. His approach to tariffs, protectionism, and trade wars has fueled fears of adverse impacts on Korea's economy.

Among these concerns is the possibility of Trump reintroducing high tariffs on foreign goods, particularly Chinese products, which could have ripple effects on Korea's trade relationships. The depreciation of the Korean won against the U.S. dollar, coupled with declining stock prices, underscore these concerns. The prospect of reduced exports to both China and the U.S. raises fears of slower economic growth, which could, in turn, dampen domestic consumption.

Additionally, the Federation of Korean Industries, a lobby group representing major businesses, reported continued pessimism in the corporate sector. Its Business Survey Index (BSI), based on responses from 600 key firms, has remained negative for 33 straight months. This is particularly troubling for the manufacturing sector, which is one of the pillars supporting Korea's economy. These findings suggest a broader economic malaise, with both consumers and businesses facing growing challenges.

Korea's economic environment was already fragile, with high inflation, sluggish domestic consumption, and rising household debt adding to the strain. These domestic issues make the country particularly vulnerable to external shocks, such as the economic policies pursued during Trump's second term. The tariffs proposed by the new U.S. president — up to 60 percent on Chinese products and additional levies on goods from other countries, including Korea — pose a significant threat to Korea's export-driven economy. Efforts by the U.S. to relocate manufacturing, particularly in the automobile sector, could further disrupt Korea's exports to one of its most vital trading partners.

Moreover, Trump's stance on China's semiconductor industry poses another threat to Korea's economic stability. With Korea being a major exporter of semiconductors to China, any attempt to curtail China's tech sector could directly impact Korea's trade. A decline in exports would likely suppress economic growth and further dampen domestic consumption.

For President Yoon Suk Yeol's administration, addressing these challenges is critical. The government has prioritized reducing income inequality and strengthening the middle class, but Trump's trade policies could jeopardize these efforts. To address these challenges, the Yoon administration may need to pivot from its current austerity-focused fiscal approach to more expansionary measures designed to stimulate demand and drive domestic consumption.

However, the BOK faces constraints in using monetary policies to combat an economic slowdown. The Korean won's continued depreciation and growing household debt leave little room for interest rate cuts, limiting the BOK's ability to act. As such, the government must focus on fiscal policies that can encourage spending, increase investments, and restore confidence in the economy.

The National Assembly must also play an important role in supporting these efforts. One key piece of legislation is the semiconductor special bill, which aims to enhance the competitiveness of Korea's vital chip industry. This bill would exempt white-collar workers from the 52-hour workweek, giving them more flexibility to work longer hours and improve productivity. Although there has been bipartisan support for the bill, the opposition Democratic Party of Korea (DPK) recently shifted its stance, putting the bill's passage at risk. The DPK should reconsider its position, as passing this bill is essential for securing Korea's competitiveness in the global semiconductor industry.

Korea's economic outlook is clouded by a mix of internal vulnerabilities and external uncertainties, notably the return of Trump and his economic policies. The government must adopt more proactive fiscal measures to support growth, while the National Assembly should pass critical legislation to ensure the nation's economic resilience. With decisive action and collaboration, Korea can better navigate these challenges and safeguard its future in an increasingly competitive global economy.