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Won inches toward 1,400 to the dollar as Korea braces for U.S. reciprocal tariffs

Published: 21 Jul. 2025, 19:04 Updated: 21 Jul. 2025, 19:50

The dollar-won currency is shown at a trading room in Hana Bank headquarters in central Seoul on July 21. [YONHAP]

The Korean won has weakened back toward the 1,400 mark against the U.S. dollar amid the return of the "king dollar," as the United States appears likely to impose reciprocal tariffs next month. Analysts warn that if the tariffs are implemented, financial market instability could deepen, given Korea’s export-dependent economy.

On Monday, the won closed at 1,388.2 won per dollar in the Seoul foreign exchange market, down 0.34 percent compared to the previous trading day's 1,393 won. Although the won's worth against the dollar rose 4.8 won from the previous trading day due to foreign buying in the local market, the strong dollar trend remains intact.

The dollar index, which measures the value of the greenback against six major currencies, rose 0.64 percent over the week, from 97.85 on July 11 to 98.48 on July 18, marking its first return to the 98 range in about a month.

The rise stems from the Donald Trump administration’s plan to impose reciprocal tariffs starting Aug. 1, with specific rates already communicated to other countries. The tariffs are expected to fuel inflation in the United States and likely delay any potential interest rate cuts. High interest rates are one of the key factors strengthening the dollar.

After strengthening to 1,350 won on June 30, the won has continued to slide this month under pressure from the stronger dollar. Following reports of the planned U.S. tariffs, the won's worth plunged to the 1,390 range on July 17 and 18.

Export cargos are piled up at Pyeongtaek Port in Gyeonggi on July 21. [NEWS1]

While U.S. President Donald Trump had previously made tariff threats only to reverse course when financial market volatility increased, many analysts believe that this time is different. The administration’s massive tax cut program, officially enacted on July 4 under the name of the “One Big Beautiful Bill,” leaves Washington with little choice but to collect more tariff revenue to make up for the resulting shortfall.

Foreign media outlets, including the Financial Times, have recently reported that Trump is adopting a hard-line stance, demanding that the European Union raise existing reciprocal tariffs from 10 percent to at least 15 to 20 percent.

Korea, with few countermeasures at its disposal, may suffer more from the tariffs than other countries. Large domestic markets like the EU can use retaliatory tariffs as a bargaining chip, but Korea cannot. If, in addition to reciprocal tariffs, the United States imposes item-specific tariffs on semiconductors — one of Korea’s key exports — the impact on the Korean economy would only worsen, which is apparently already reflected in the foreign exchange market.

Another factor behind the dollar’s strength is U.S. policy bolstering demand for dollars through stablecoins. The U.S. House of Representatives passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, on July 17, which brings stablecoins into the regulatory framework. Dollar-based stablecoins are major buyers of U.S. Treasurys and other dollar assets, and their expansion is expected to further support the value of the dollar.

“With the United States having announced a specific date for tariffs to take effect on Aug. 1, the foreign exchange market inevitably leans toward a stronger dollar," said Baek Seok-hyun, an economist at Shinhan Bank. "If tariff rates are lowered during negotiations, the strong dollar trend may ease somewhat. Otherwise, dollar-buying in the foreign exchange market is likely to intensify for the time being.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM NAM-JUN [[email protected]]