The Korean Won Hit by Tariff War... Again the 'Highest' Since the Global Financial Crisis [Hankyung Foreign Exchange Market Watch]

The won-dollar exchange rate rose (the value of the won fell) as signs of an intensifying tariff war between the United States and China emerged. Following the announcement of mutual tariffs by the United States and retaliatory tariffs by China, U.S. President Donald Trump hinted at further retaliation, pushing the exchange rate to its highest level in about 16 years since the global financial crisis.

On the 8th, the won-dollar exchange rate in the Seoul foreign exchange market (as of 3:30 PM) closed at 1,473.20 won, up 5.40 won from the previous day. This is the highest level since March 13, 2009 (1,483.50 won). It also surpassed the highest level recorded since the emergency martial law on the 31st of last month (1,472.50 won).

The exchange rate opened at 1,471 won per dollar on this day, fell to 1,466.30 won during the day, but rebounded in the afternoon, rising to 1,473.90 won around 3 PM.

The rise in the exchange rate is due to the intensifying tariff conflict between the United States and China. President Trump warned that if China does not withdraw its retaliatory tariffs announced overnight at the same rate (34%) as mutual tariffs, an additional 50% tariff will be imposed on the 9th.

On this day, the People's Bank of China set the yuan exchange rate at 7.2038 yuan per dollar (about 1,452 won). This is a further devaluation of the yuan compared to the previous day (7.1980 yuan), contrary to President Trump's criticism targeting currency weakness. China's Ministry of Commerce also stated that it would take countermeasures again if President Trump imposes additional tariffs.

As President Trump announced, the United States implemented a 10% basic tariff on all countries worldwide on the 5th, and plans to implement differentiated mutual tariffs by country from the 9th. The possibility of a global economic recession, including in the United States, is being considered, and the risk aversion sentiment for assets such as the won is not subsiding.

Min Kyung-won, an economist at Woori Bank, explained, "President Trump has left open the possibility of additional negotiations with countries other than China, but uncertainty remains high," adding, "The risk aversion sentiment is widespread in the financial market, and the weakness of the won, a risky currency, will continue."

As of 3:30 PM on this day, the won-yen cross rate was 998.68 won per 100 yen. It fell 9.53 won from the same time the previous day (1,008.21 won), dropping below 1,000 won in just one day. The yen-dollar exchange rate was 147.5 yen per dollar, up 1.31%.

Reporter Kang Jin-kyu josep@hankyung.com