Asia’s ‘Black Monday’: Tariff war triggers global Market Meltdown

Asia’s financial markets suffered a brutal “Black Monday” on April 7, shaken by the shockwaves of a U.S.-led reciprocal tariff war. South Korea’s benchmark KOSPI plunged more than 5%, breaking below the 2,400-point mark, triggering a sidecar—a temporary halt on program trading—for the first time in eight months. The won-dollar exchange rate, which had been stabilizing, soared by the most in five years, hovering above 1,470 won. Stock markets in Japan, China, Taiwan, and Hong Kong also plummeted by nearly 10%, turning a collective shade of panic blue. A deep fear of a global economic downturn—dubbed “R” for recession—is spreading rapidly, driven by escalating tariffs and retaliatory measures pushing the world to the brink.

The Trump administration hailed the imposition of reciprocal tariffs as “America’s Liberation Day,” but backlash from U.S. academia and business circles was swift and severe. Critics branded the move “an economic nuclear war” and “the worst act of self-harm in history.” Within just two days, the U.S. stock market lost over 10%, marking the fourth-largest drop since World War II, and nearly one quadrillion won in market value evaporated. The meltdown spared no asset class—stocks, gold, and commodities all sank. Mass anti-Trump protests further reflect the deepening unrest within the United States.

Doubts worldwide about whether the U.S. remains a reliable negotiating partner are growing. The so-called “reciprocal tariff rates,” which were supposed to be based on a comprehensive review of tariff and non-tariff barriers, were instead derived from an arbitrary formula: half the ratio of a country's trade deficit to its imports. The result has drawn derision, likened to “applying creationism to biology or astrology to astronomy.” Countries seeking sincere negotiations with the U.S. now find their efforts meaningless.

An open-ended trade war is bound to deal a heavy blow to South Korea’s trade-reliant economy. Domestic financial institutions estimate that if reciprocal tariffs are fully implemented, Korea’s exports to the U.S. could shrink by 13%, and domestic value-added output could drop by over 10 trillion won. Already reeling from political instability due to the recent presidential impeachment, South Korea recorded just 0.06% economic growth in the fourth quarter of last year, ranking 29th out of 37 major economies, and barely avoided negative growth in the first quarter of this year. In such a weakened state, the economy has little capacity to rebound.

To brace for a protracted tariff war, South Korea must first restore its shattered economic leadership, which has suffered under ongoing political turmoil. Negotiations with the United States must be meticulously prepared, while efforts should be ramped up to prevent financial turmoil and minimize corporate losses. A supplementary budget to stimulate domestic demand is also urgently needed and can no longer be delayed. It is time for the government and private sector to close ranks, dig in deep, and prepare for a long and grueling battle.