South Korean state think tank cuts 2025 growth forecast, flags US tariff risk

South Korea’s state-run think tank has cut its growth forecast for the country this year, citing President Donald Trump’s trade policy as a downside risk to exports growth.

Deteriorating global trade conditions since Trump took office in the U.S. are largely behind the downward revision, the Korea Development Institute said Tuesday.

The KDI said it now forecasts South Korea’s gross domestic product growth at 1.6% in 2025, slower than its November projection of a 2.0% expansion. The economy grew 2.0% last year, according to the think tank.

Exports are projected to grow just 1.8% this year, weakening from last year’s estimated 6.9% increase due to worsening global trade conditions, the institute said.

Trump on Monday announced 25% tariffs on imports of steel and aluminum to the U.S., reinstating global duties without exceptions for allies such as Canada, Mexico, Japan and South Korea that were relaxed by the Biden administration.

The steel and aluminum tariffs are just the latest in a litany of tariff threats and impositions from Trump in the first weeks of his second term.

“If trade disputes intensify while uncertainty about international trade conditions remains high, there is a possibility that significant downward pressure will be placed on the Korean economy,” the KDI report said.

It expects inflation in South Korea to average 1.6% this year, unchanged from its earlier projection.

Inflation averaged 2.3% in South Korea in 2024, the KDI said.

Write to Kwanwoo Jun at Kwanwoo.Jun@wsj.com