How are South Korean Companies Coping with Declining Growth and Profitability Due to US Tariffs?
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Synopsis
South Korean businesses are grappling with decreased growth and profitability in Q2, largely due to the effects of US tariffs. This decline marks a significant shift in corporate performance, raising concerns about future economic stability. Discover how companies are navigating these challenges and what it means for the broader economy.
Key Takeaways
- South Korean corporate growth and profitability have declined in Q2.
- The impact of US tariffs is significant on both exports and sales.
- Manufacturing sales declined by 1.7% in Q2.
- Profit margins for large firms dropped to 5.1%.
- Financial stability metrics remain largely unchanged.
Seoul, Sep 10 (NationPress) South Korean enterprises have reported a decline in both growth and profitability during the second quarter, primarily due to the repercussions of the United States' stringent tariff policies, according to the central bank's announcement on Wednesday.
The collective revenue of 26,067 companies undergoing external audits experienced a decrease of 0.7 percent compared to the same quarter last year, reversing from a 2.4 percent year-on-year increase in the first quarter, as per the data released by the Bank of Korea (BOK), as reported by Yonhap news agency.
This marks the first occurrence of negative sales growth since the fourth quarter of 2023.
In the manufacturing sector, sales fell by 1.7 percent in the second quarter, in contrast to a 2.8 percent rise in the prior quarter, while growth in the non-manufacturing sector decelerated to 0.3 percent from 1.9 percent during the same timeframe.
Moon Sang-yoon, an official at BOK, noted during a press briefing, “Weak exports in the petrochemical industry have adversely impacted overall corporate growth. The U.S.' tariff increases have also affected company performance, especially in the steel and automotive sectors.”
He further added, “Although a tariff agreement has been established, a high level of uncertainty persists.”
Indicators of profitability have also shown declines. The operating profit margin across the surveyed companies dropped to 5.1 percent in the second quarter, a decrease of 1.1 percentage points from the same period last year.
Large corporations saw their operating profit margin decline from 6.6 percent to 5.1 percent, while small and medium-sized enterprises (SMEs) recorded an increase from 4.4 percent to 5 percent.
Financial stability metrics remained relatively stable.
The debt-to-equity ratio for the surveyed firms was 89.8 percent in the second quarter, a slight decrease from 89.9 percent in the first quarter.
Moreover, their borrowing dependency rose to 26.6 percent during this period, up from 25 percent in the preceding quarter, according to the data.
Point of View
It is crucial to recognize the ongoing challenges faced by South Korean companies amidst evolving international trade dynamics. The decrease in growth and profitability emphasizes the importance of strategic adaptability in the face of external pressures. We must continue to monitor these developments closely, as they have significant implications for both the national economy and global trade relations.
NationPress
10/09/2025
Frequently Asked Questions
What caused the decline in South Korean corporate growth in Q2?
The decline was primarily attributed to the impact of aggressive US tariff policies on exports and overall corporate performance.
How much did sales drop for South Korean companies?
Sales fell by 0.7% in the second quarter compared to the previous year.
What sectors were most affected by this decline?
The manufacturing sector saw a 1.7% decline, while non-manufacturing growth slowed significantly.
What does the future hold for South Korean businesses?
While a tariff agreement has been reached, uncertainty remains high, impacting future growth prospects.
How did profitability indicators change?
The operating profit margin for surveyed companies decreased to 5.1%, down from the previous year's figures.
