Korean won hits 16-year low as U.S. tariffs take effect

The Korean won slumped past the 1,480 mark against the U.S. dollar on Wednesday, hitting its weakest level since the 2009 global financial crisis as sweeping tariffs imposed by President Donald Trump took effect.

The move underscored South Korea’s economic vulnerability amid intensifying trade tensions between its two largest trading partners — China and the United States. The won closed at 1,484.1 per dollar, down 10.9 won from the previous day, marking its lowest level since March 2009. The currency briefly touched 1,487 earlier in the day.

Although recent domestic political uncertainty has somewhat eased, the escalating tariff confrontation between Washington and Beijing has accelerated the won’s decline. China has responded directly to the Trump administration’s 104% tariffs, raising fears of a prolonged trade war.

Analysts warn that the exchange rate could soon breach the psychological barrier of 1,500 won if foreign capital continues to exit South Korea’s markets. The benchmark Korea Composite Stock Price Index, or KOSPI, fell below the 2,300 mark for the first time in 18 months, dragged down by foreign investors who have sold more than 8 trillion won (approximately $6 billion) in local stocks this month.

Pressure on the won is further compounded by China’s efforts to devalue the yuan in an attempt to mitigate the impact of the tariffs — a move that tends to weigh heavily on the Korean currency due to its strong correlation with the yuan.

A continued slide in the won could have serious implications for South Korea’s import-reliant economy. Higher raw material and energy costs, coupled with the burden of dollar-denominated debt, are squeezing Korean companies already grappling with the impact of 25% reciprocal tariffs. Consumers are also feeling the strain, as a weaker won drives up import prices and dampens domestic consumption, further delaying economic recovery.

With some forecasts projecting zero growth for South Korea this year, the prolonged currency weakness could deepen the country’s economic difficulties. Experts are urging authorities to implement a 24-hour emergency monitoring system to manage volatility in the foreign exchange and financial markets. They also recommend proactive measures to prevent further depreciation from fueling inflation and to strengthen currency defense mechanisms to stabilize the market.