Diagnosis of S. Korea's economic challenges amid U.S. tariffs and Middle East tensions

Welcome to Within The Frame, where we bring the most pressing issues across the globe into focus. I'm Kim Mok-yeon.

South Korea's economy is facing increasing challenges, from the impact of U.S. tariffs to escalating tensions in the Middle East.

In May, exports turned negative for the first time in four months, with automobile exports to the U.S. dropping over 27 percent.

At the same time, the global oil market is seeing volatility due to the Israel-Iran conflict.

Domestically, inflation is rising, particularly in food prices, and the Federal Reserve's decision to hold interest rates steady, adds another layer of complexity to the situation.

On Within The Frame tonight, we'll explore how these factors are shaping Korea's economic future and what strategies may help navigate these turbulent times.

For this, we invite Shin Se-don, Professor, Division of Business Economics at Sookmyung Women's University.

Also joining us from Texas is Hwagyun Kim, Professor of Banking and Finance at Texas A&M University, Mays Business School.

(Shin) 1. To begin with, due to the fallout from the U.S.-imposed tariff shock, Korea's exports in May declined for the first time in four months.

In particular, exports of automobiles—a key export item—plummeted over 27 percent to the U.S. in May.

Professor Shin, do you expect export growth to decline further this year? What is your outlook?

(Kim) 2. Moving on to another important issue, the bilateral Korea-U.S. tariffs are set to take effect in about three weeks.

However, the much-anticipated summit between the two leaders during the G7, which could have influenced tariff negotiations, was cancelled.

Professor Kim, in light of this, what kind of strategy should the Korean government be preparing?

(Shin) 3. Meanwhile, Japan has already engaged in six rounds of tariff negotiations with the U.S., and a summit between their leaders took place at the G7.

Despite this, negotiations between the U.S. and Japan remain at a standstill. Professor Shin, from this, what lessons can Korea draw for its own negotiations with Washington?

(Kim) 4. Shifting focus to the international stage, tensions between Israel and Iran have escalated, leading to increased Middle East risks and a sharp rise in global oil prices. Professor Kim, given this context, what is your outlook on oil price volatility moving forward?

(Kim) 5. On a related note, the U.S. Federal Reserve recently decided to hold interest rates steady for the fourth consecutive time at the latest FOMC meeting.

Professor Kim, what are the key factors behind this decision, and what is your perspective on the Fed's decision?

(Shin) 6. While the Fed has kept rates unchanged at the FOMC meeting, it also indicated through its "dot plot" that two additional rate cuts might still be possible this year. Professor Shin, in light of this, what do you think is the reasoning behind this outlook?

(Kim) 7. With both U.S. tariffs and heightened Middle East tensions, the burdens on the Korean economy are increasing.

With the KOSPI breaking the 3,000-point mark during trading for the first time in three years and five months, Professor Kim, how will the Middle East risks and the Fed's rate freeze impact domestic stock markets?

(Shin) 8. Domestic inflation is also concerning. According to a report from the Bank of Korea, food prices have risen 19.1 percent over the past four years—second highest among OECD countries. Professor Shin, how do you assess the current inflationary mood?

(Shin) 9. In light of inflation pressure and economic slowdown, the ruling party and government are reportedly preparing an extra budget totaling 35 trillion won.

Discussions are also underway about relief measures, including universal cash support. Professor Shin, will these measures help revive livelihood in the economy?

(Kim) 10. Meanwhile, Korea's national competitiveness ranking dropped by seven spots from last year to 27th.

The Presidential Office has announced a coordinated cross-ministry response to recover competitiveness.

Professor Kim, what do you think are the key factors for restoring national competitiveness?