Small businesses face a double burden of "supply shortages and demand loss."
Low-cost platforms like Amazon are also hit by the tariff shock.
Ongoing discord between the two countries deepens market turmoil.

As the U.S. implements steep tariffs on Chinese imports, small businesses and retail platforms within the country are emerging as the first casualties. Chinatowns and online sellers reliant on low-cost Chinese goods are facing a crisis as their profit structures collapse. Amid this, trade talks between the U.S. and China remain at an impasse, further intensifying market uncertainty.

Warning signs of collapse in low-cost supply chains

Skepticism is growing among U.S. entrepreneurs about the Trump-era “reshoring” policy aimed at reducing dependence on Chinese goods. According to Viahart founder Molson Hart, efforts to relocate production to the U.S. have largely failed due to cost—local manufacturers often quote prices more than double those of Chinese suppliers. Similarly, Chinatown businesses in major cities like New York and San Francisco, long dependent on Chinese imports, are now unable to maintain price competitiveness. Local vendors say that either no alternatives exist or domestic replacements are prohibitively expensive.

Community leaders warn of ripple effects throughout immigrant-run urban economies. Wellington Chen, Executive Director of the Chinatown Partnership, stated the tariffs would have “lasting and devastating impacts” on Chinese American communities—potentially worse than post-9/11 disruptions. With few viable alternatives for procurement, many small businesses are expected to face a dual crisis of supply shortages and declining demand.

Online platforms hit hard by tariff shock

The fallout extends beyond brick-and-mortar shops. Major online platforms like Amazon, which rely heavily on low-cost Chinese goods, are particularly vulnerable. Many marketplace sellers source directly from Chinese manufacturers and use direct shipping or local warehouses to maintain low prices. With tariffs driving up product costs, sellers face a choice between absorbing losses or raising prices—both of which threaten their survival.

As prices rise, sellers are reducing product lines and cutting services like free shipping. Even those seeking alternative suppliers find that higher production costs erode their competitiveness within Amazon’s price-sensitive ecosystem. Consumers, accustomed to bargain hunting via lowest-price filters, are increasingly likely to turn away from more expensive listings—especially in high-volume categories like baby products, household goods, and electronics accessories.

Mounting fears of prolonged trade conflict

Meanwhile, the U.S.-China trade conflict is escalating. The U.S. justifies the tariffs as a defense against unfair trade practices, while China denounces them as a breach of the Phase One trade deal signed in 2020. Beijing’s Ministry of Commerce recently demanded the U.S. uphold its previous commitments, stating the new tariffs undermine the spirit of that agreement.

This diplomatic standoff is now causing real market instability. With no end to tariffs in sight, companies are scrambling to rework their supply chains and procurement strategies amid growing uncertainty. Many are delaying new contracts and investment decisions due to a lack of clarity.

The broader concern is that U.S. tariff policy has shifted from a tool to reduce trade deficits to a lever in a geopolitical power struggle. The U.S. Trade Representative has hinted at further tariff hikes, citing China’s industrial subsidies and intellectual property practices. China is expected to retaliate in kind. As tit-for-tat measures continue, the loss of policy consistency is eroding trust, and the cycle of tariffs and countermeasures is seen as a major roadblock to market recovery.

From Semiconductors to Automobiles, Core Industries Losing Ground
Exports Slump Amid Chinese Competition and U.S. Tariff Barriers
Prolonged Domestic Slump Accelerates Brain Drain of Top Talent

The global market share of South Korea’s eight key industries—long considered the backbone of the country’s economy—has declined across the board over the past decade. Core sectors such as semiconductors, displays, automobiles, and batteries are losing their technological edge under mounting pressure from China. Simultaneously, fallout from U.S.-China trade tensions and tariff wars is further weighing on exports. The prolonged slump in domestic demand is flashing warning signs across industries, while the accelerating outflow of top talent abroad is raising deeper concerns about the future of Korea’s industrial competitiveness.

Display Market Share Nearly Halved in 10 Years

According to market research firms like Omdia and SNE Research, all eight of Korea’s major industries—semiconductors, displays, smartphones, automobiles, petrochemicals, steel, shipbuilding, and batteries—have seen a decline in global market share over the past decade. The most dramatic drop occurred in the display sector. In 2015, Korean firms Samsung and LG held a combined 98.5% share of the small-to-medium OLED display market (used in smartphones), effectively monopolizing the space. However, by Q1 of this year, that share had fallen below 60% as Chinese competitors like BOE and CSOT gained ground.

Even semiconductors—Korea’s top export—are not immune. The combined global DRAM market share of Samsung and SK Hynix dropped from 81.5% in 2015 to 75.9% in Q1 2025. Meanwhile, China’s CXMT has completed preparations to mass-produce not only standard DRAM but also higher-value memory products such as DDR5 and HBM3. According to a February survey by Korea’s Science and Technology Planning and Evaluation Institute, China has overtaken Korea in several advanced semiconductor technologies, including AI chips, power semiconductors, and next-generation sensors—excluding only advanced packaging.

Automobiles, Korea’s second-largest export category, are also under threat. Last year, the combined vehicle sales of China’s top two automakers—BYD (4.27 million units) and Geely Group (3.34 million)—totaled 7.61 million units, surpassing Hyundai Motor Group's 7.23 million and making the Korean automaker third in global rankings. The secondary battery industry is in decline as well: its market share plummeted from 34.7% in Q4 2020 to 18.7% in Q1 2025, and all three major Korean battery makers posted operating losses. Other sectors such as smartphones (from 23.8% to 20.0%), petrochemicals (5.3% to 3.6% in ethylene), steel (4.3% to 3.4%), and shipbuilding (30% to 17%) are following a similar downtrend.

Tariff-Targeted Exports to U.S. Take a Hit

While China’s rapid industrial ascent continues, the U.S.-China tariff war, ignited during Donald Trump's presidency, has become a new headwind. According to South Korea’s Ministry of Trade, Industry and Energy, exports to Korea’s two biggest markets—China and the U.S.—both dropped by over 8% in May. Export declines were especially severe in categories affected by U.S. tariffs. Steel exports to the U.S., which were hit with a 25% tariff in March, fell 20.6% last month. Cars and auto parts, which faced two rounds of 25% tariffs in April and May, saw their U.S. export volumes decline by 32.0% and 8.3%, respectively.

The new 10% baseline tariff introduced in April also weighed on U.S.-bound exports. General machinery exports—Korea’s second-largest export category—fell 5.6% last month, and home appliance exports plunged 25.4%. While secondary batteries and bio-health products saw increases of 33.6% and 9.1%, respectively, these gains were not enough to offset the broader decline in overall U.S. exports. Even semiconductors, long a pillar of Korea’s exports to the U.S., have started to stumble. While semiconductor exports to the U.S. rose 14.6% year-over-year during January to April, they dropped 17.6% in May alone.

China, once Korea’s top export destination, is also becoming a problem. After rebounding 3.9% in April, Korea’s exports to China fell sharply again by 8.4% in May. The largest declines were in intermediate goods, such as semiconductors and petrochemicals. Chip exports to China, which account for around 30% of Korea’s total exports to the country, fell 14.6% year-on-year in May. Petrochemical exports dropped by 11.4%, and general machinery exports declined by 13.6%, exacerbated by China’s ongoing real estate slump.

5,684 High-Skilled Koreans Move to U.S.—World’s Highest Brain Drain Rate

To make matters worse, Korea’s domestic market remains sluggish. According to Statistics Korea, the average constant-value retail sales index for January to April declined 0.2% year-on-year, continuing a three-year downturn. This has led to a wave of small business closures. In Q1, the number of new store openings in Seoul fell to 8,772—the lowest since data tracking began in 2019. Meanwhile, closures surged. While store openings (16,827) and closures (15,316) were nearly equal in Q1 2023, closures outnumbered openings by 1.7 times this year.

The sharp decline in new businesses is largely due to deteriorating profitability in self-employment. A nationwide survey of 1,000 small business owners conducted in April by the Korea Federation of Micro Enterprises found their average monthly operating profit was 2.09 million won—lower than the monthly minimum wage for a 40-hour workweek (2.10 million won). Business survival rates are also falling: the one-year survival rate for newly established everyday service businesses in Seoul dropped from 81.6% in 2023 to 80.9% in 2024, and to 78.2% this year. This means 1 in 5 businesses shuts down within a year. “Existing shops are in survival mode, and new entries are dwindling,” the federation noted.

Amid weak domestic demand and export stagnation, Korea is also facing an accelerating brain drain. According to the U.S. State Department, 5,684 South Koreans received EB-1 or EB-2 employment-based visas in 2024, equivalent to 10.98 recipients per 100,000 people, the highest rate in the world. That figure is over 10 times higher than India (1.44) and China (0.94). Since these visas typically provide green cards for entire families, it's estimated that 1,400 to 1,500 highly skilled Koreans and their dependents emigrated to the U.S. last year alone.

Traditional VC Model Faces Structural Crisis Amid High Interest Rates
Solo GPs Offer Strengths in Fast Decision-Making and Low Fixed Costs
Proven to Deliver Higher Returns and Operational Efficiency Compared to VCs

In Silicon Valley, growing limitations of the traditional venture capital (VC) model are fueling interest in new investment approaches. With multi-partner VCs facing structural challenges, a new alternative is gaining traction in the investment world: the Solo General Partner (Solo GP) model, which allows for agile and consistent investment decisions through a lean structure with minimal fixed costs.

Over Half of New Silicon Valley Funds Are Now Solo GPs

According to the 2025 Solo GP Landscape Report released on June 2 by venture research firm New Economies, Solo GPs made up only a tiny fraction of new fund managers in the U.S. in 2020. However, by last year, over half of newly launched funds were formed under the Solo GP model. This shift reflects a broader change in the investment landscape—where smaller fund sizes, operational efficiency, and clear investment criteria are increasingly valued. With low overhead and minimal staffing, Solo GPs can operate more swiftly and focus more intensely than traditional VCs.

A "Solo GP" refers to a model where a single general partner—rather than a team of partners—raises and manages a venture fund, leveraging their personal brand and network. Typically managing smaller capital pools than traditional VCs, Solo GPs invest across a wide range of stages, from early startups to Series C or D and beyond. Because investment decisions are made by just one person, Solo GPs exhibit strategic flexibility, often backing bold or high-risk ideas that larger institutional VCs may avoid.

Success Stories Are Already Emerging

Several Solo GP success stories have already emerged in Silicon Valley. Elad Gil, for example, began angel investing in 2008 and backed unicorns such as Airbnb, Coinbase, and Notion in their early stages. In the late 2010s, he formally transitioned into a Solo GP, launching and managing large-scale funds.

Similarly, Oren Zeev runs Zeev Ventures entirely on his own, without co-partners or investment committees. As of the first half of 2024, Zeev Ventures had over USD 2 billion in assets under management (AUM), making it the largest known Solo GP fund.

More Consistent Strategy and Higher Returns

Historically, funds managed by a single GP were seen as riskier than those managed by multiple partners. Critics pointed to "key person risk"—what happens if the sole GP becomes incapacitated—as well as limited access to networks and resources. There were also concerns about one person having to handle not only investment decisions but also fundraising, accounting, and internal operations.

However, recent developments have challenged that perception. Traditional VCs are often plagued by governance risks, such as internal partner conflicts or departures that disrupt strategy and team cohesion. Solo GPs, by contrast, provide stability and consistency in investment strategy due to the absence of internal power struggles. The growing availability of outsourced and automated back-office infrastructure has also enabled Solo GPs to manage funds efficiently on their own.

From a performance perspective, Solo GPs are proving competitive, if not superior. According to platforms like Cartaand Preqin, Solo GP funds in the U.S. had an average internal rate of return (IRR) exceeding 30% between 2020 and 2024—nearly 10 percentage points higher than co-managed VC funds in the same period. This strong performance has attracted interest from major limited partners (LPs), including U.S. pension funds, family offices, and even historically conservative university endowments.

A Sign of Structural Crisis in the VC Industry

Experts argue that the rise of Solo GPs isn't just the emergence of a new type of investor—it’s a symptom of the structural crisis facing the VC industry. The sector has recently struggled with shrinking capital inflows and declining startup valuations, making both new fund formation and follow-on investments more difficult.

The prolonged period of high interest rates has created a double bind: startups face increased capital costs, while VCs have reduced investment capacity. At the same time, exit markets have stalled. IPOs and M&A activity have dried up, leaving investors with fewer paths to realize returns. In 2023, only 40 of over 1,300 U.S. unicorns managed to exit via IPO or acquisition. As a result, even well-established VCs have resorted to emergency measures like extending fund lifespans and restructuring portfolio companies. Some have become “zombie VCs,” facing capital erosion or returning their licenses.

These trends suggest that the traditional VC model is approaching its limits. The classic strategy of making small early-stage bets and scaling them quickly for big exits no longer works reliably. As the role of VCs shifts from mere capital providers to value creators—offering networks, domain expertise, and startup support—many VCs are struggling with strategic direction and identity. In this context, Solo GPs—with their lean structures, bold investment strategies, and proven returns—are increasingly seen not just as a complement to VCs, but as a viable alternative in a transforming venture capital landscape.

“Steel Tariff Hike Announced After Accusing China of Breaching Agreement”
“25% Tariff System Had Loopholes; Hike Will Prevent Evasion”
“Approval of Nippon Steel–U.S. Steel Merger Sends a Political Signal”

In a fiery return to protectionist trade policy, U.S. President Donald Trump has unveiled a dramatic escalation in tariffs on foreign steel and aluminum imports, doubling existing rates to 50%. The announcement, made during a speech at a U.S. Steel plant in Pittsburgh, is widely viewed not just as an economic maneuver, but a politically charged message aimed squarely at China. While cloaked in rhetoric about safeguarding American industry, the move comes at a time of legal, geopolitical, and corporate developments that reveal a deeper strategy at play. It signals Trump’s renewed commitment to his “America First” agenda and a more aggressive posture against foreign trade partners—especially Beijing.

Steel and Aluminum Tariffs Doubled in High-Stakes Announcement

On May 30, President Trump took to the stage at U.S. Steel’s facility in Pittsburgh and declared that tariffs on imported steel and aluminum would rise from 25% to 50%, effective June 4. The existing 25% duties had been in place since March 2024 under Section 232 of the Trade Expansion Act, which allows tariffs on imports deemed a threat to national security. However, Trump argued that these measures had loopholes that foreign producers—especially China—continued to exploit.

“Increasing the tariffs will shut down those loopholes,” Trump said. “This will protect American steel more safely than ever before, and no one will be able to get around it.”

Though his speech focused on steel, he later took to his Truth Social account to announce that aluminum tariffs would also be doubled. “It is a great honor to raise tariffs on steel and aluminum from 25% to 50%,” he wrote. “This takes effect on Wednesday, June 4.”

The escalation reflects Trump's frustration with ongoing foreign imports despite the 25% barrier and the stagnation of tariff negotiations with other countries. U.S. trade officials have cited continued inflows of foreign steel as evidence that the original policy lacked sufficient deterrent force. The new 50% rate is designed to close off indirect trade routes and send a strong signal to countries attempting to circumvent tariffs by rerouting exports through third countries.

Nippon Steel Deal Sets the Stage

Trump’s tariff announcement also coincides with the pending acquisition of U.S. Steel by Japan’s Nippon Steel Corporation—a deal that had initially faced resistance from Trump himself. Just a week prior, on May 23, Trump reversed his opposition to the acquisition, which he had once blocked over national security concerns. Analysts now believe the tariff hike was partly a political maneuver to position the acquisition as a victory for American workers rather than a foreign takeover.

Trump’s visit to the U.S. Steel plant was strategic. As he stood before workers in Pittsburgh, he tied the acquisition to his tariff policy, declaring: “I think the people who just made this investment [Nippon Steel] are going to be very happy—because now, no one can take your industry away from you.”

U.S. Steel had already disclosed in April filings to the U.S. Securities and Exchange Commission (SEC) that it would become a wholly owned subsidiary of Nippon Steel’s North American arm but would continue to operate as an independent company. Trump’s change of heart came just one day before the Committee on Foreign Investment in the United States (CFIUS) was scheduled to review national security implications of the deal. In a surprise move, the two companies announced a formal partnership, and the deal appears poised to move forward.

For Nippon Steel, the acquisition offers more than symbolic value—it delivers immediate production capacity within the U.S. market. This would allow the Japanese firm to sidestep tariff burdens, reduce shipping times, and gain a stronger foothold in American supply chains. For Trump, the optics are powerful: he can claim to have both approved foreign investment and strengthened protection for American steelworkers, all in one stroke.

Escalation Against China Amid Legal Setback and Political Theater

While the tariff announcement appeared to target all foreign steel producers, many observers see it as a thinly veiled strike against China. Just two days earlier, on May 28, the U.S. Court of International Trade (CIT) had dealt a blow to Trump's tariff strategy by issuing an injunction against the enforcement of “reciprocal tariffs”—a key pillar of the administration’s trade leverage. The ruling complicated Trump’s plan to use matching tariffs as bargaining chips in ongoing trade negotiations with global partners, especially China.

In response, Trump seems to have pivoted toward item-specific pressure tools. Only hours before announcing the steel tariff hike, he posted a blistering attack on China via Truth Social, accusing Beijing of violating a recent tariff agreement. “China has completely violated the deal it made with us,” he wrote. “I helped them avoid economic collapse—and now they’ve broken their word. No more Mr. NICE GUY.”

The outburst came just weeks after a temporary truce in the U.S.-China trade war. On May 12, following high-level negotiations in Geneva, the two nations agreed to lower their respective tariffs—China’s to 10% and the U.S.’s to 30%—for a 90-day period. Trump’s sudden reversal of tone suggested impatience with what he viewed as China’s unwillingness to fully honor the agreement or engage meaningfully in follow-up talks.

Though Trump did not cite specific violations, market analysts believe the accusation was a pretext to justify renewed tariff escalation. China, which accounted for 54% of global steel production in 2022 according to the World Steel Association, remains a dominant player in the industry. Its steel, priced well below global averages, continues to flow into U.S. markets through both direct and indirect export routes—often via intermediary countries to bypass tariffs.

Trump has long portrayed Chinese steel as the central villain in America’s industrial decline. Calling it a “core cause of the collapse of American industry,” he has repeatedly targeted it as a symbol of unfair trade practices and economic imbalance. In this latest move, Trump is not just protecting domestic factories—he’s reinforcing his tough-on-China image in the lead-up to the midterm elections.

Steel is more than just an economic issue; it’s a political battleground. For China, it is a strategic export and a pillar of its supply chain dominance. For Trump, it is a symbol of American resilience and a convenient pressure point in the broader geopolitical contest. By doubling down on tariffs, Trump is setting the stage for a new round of trade confrontation—one where economic policy, legal maneuvers, and political calculation all converge.

BYD’s ‘Bombshell Sale’ Intensifies Price Competition
Potential Reshaping of Competitive Landscape with Tesla
Accounting Transparency and Hidden Debt Issues Come to Light

As the world accelerates toward a future dominated by electric vehicles, China's BYD—now the global EV leader—is not just participating in the race but rewriting the rules. Known for its rapid ascent and formidable domestic presence, BYD is intensifying a two-pronged strategy aimed at reshaping both the Chinese and global electric vehicle markets. By launching a wave of aggressive price cuts across its lineup, the company seeks to eliminate smaller rivals at home and corner major players like Tesla on the world stage. But while the surface narrative showcases dominance and innovation, a closer look reveals mounting financial risks, opaque accounting practices, and a low-margin business model that could jeopardize its long-term ambitions.

The EV “Chicken Game” Heats Up in China

In a bold move announced at the end of May, BYD revealed plans to slash prices by up to 34% on 22 of its vehicle models through the end of June. Among the most dramatic cuts was the compact Seagull (SEAGULL), whose price dropped nearly 20%, from approximately USD 9,600 to USD 7,600. Meanwhile, the mid-to-large Seal (SEAL) sedan was reduced by a full 34%, now retailing for USD 14,300. The scale and scope of these reductions were seen as unprecedented, signaling a new phase in China’s EV war.

The motivation behind these aggressive discounts, according to industry analysts, lies in a ballooning inventory problem. Since the beginning of the year, BYD’s unsold vehicle stock has increased by roughly 150,000 units—nearly half of its average monthly sales volume of 350,000 vehicles. After selling 4.27 million vehicles in 2023, BYD raised its 2024 target to a staggering 5.5 million. With such lofty goals, the company is under enormous pressure to clear inventory to maintain sales momentum.

But BYD’s pricing bombshell didn’t go unnoticed. It ignited a ripple effect across the industry, pushing competitors into a corner. Leapmotor responded by slashing prices by around 30%, and Geely cut up to 18% on seven of its models. Even Changan Automobile—a player known for focusing on high-end models—was forced to offer a 10.5% discount on its flagship Deepal S07, bringing its price down to about USD 23,700.

Industry observers believe BYD’s tactics signal more than a push to boost short-term sales—they point to a larger strategy of forced consolidation. By triggering an industry-wide price war, BYD appears intent on weeding out weaker firms, restructuring the market around a few major players. As of March 2024, BYD’s domestic market share stood at 29.7%, down from 37.5% a year prior. While still in the lead, the 7.8 percentage point drop suggests the company is under pressure to defend its dominant position. Its price war, then, is not just tactical—it’s existential.

BYD’s Bold Push for Global Dominance

Beyond its domestic turf, BYD’s ambitions stretch across continents. Its dramatic price reductions are not merely a reaction to local competition but part of a larger strategy to alter the global EV hierarchy. Nowhere is this more evident than in the shifting status of Tesla, BYD’s chief international rival. As Tesla grapples with dual pressure from BYD and local disruptor Xiaomi in China, its once-prized position in the world's largest EV market is weakening. Tesla’s continued emphasis on high-end models appears increasingly out of sync with consumer demand, especially in a market where affordability and technological novelty drive sales.

BYD, in contrast, has a structural advantage. With a vertically integrated business model that includes in-house battery manufacturing, the company enjoys a level of price flexibility that Tesla cannot easily match. This nimbleness allows BYD to deploy aggressive pricing strategies without immediately jeopardizing its supply chain or production efficiency. In effect, it can weaponize price while maintaining scale.

Meanwhile, Xiaomi is carving out space in the premium EV segment, effectively flanking Tesla from the opposite side. The release of Xiaomi’s debut electric car, the SU7, generated a media frenzy when it racked up 50,000 pre-orders in just eight minutes. With Xiaomi appealing to consumers seeking style and novelty, and BYD dominating the value market, Tesla finds itself squeezed between two aggressive and fast-moving Chinese competitors. This dynamic marks a clear shift in consumer preference toward vehicles that are either significantly cheaper or notably more innovative than Tesla's offerings.

This domestic battle has clear international echoes. BYD is accelerating its expansion into Europe and Southeast Asia, markets where Tesla had previously enjoyed considerable dominance. In several emerging markets, BYD’s affordability and solid performance are winning over consumers and governments alike. Its growing presence in economies experiencing financial instability only strengthens its value proposition—where price and durability matter more than brand prestige.

Industry consensus is coalescing around a sobering conclusion: Tesla must revise its strategy if it hopes to retain relevance in this rapidly shifting landscape. BYD, by launching an assault on both domestic and foreign fronts, is no longer just a competitor—it’s the primary architect of a new EV world order.

Aggressive Pricing Strategy Could Amplify BYD’s Debt Risk

But behind BYD’s relentless drive lies a less glamorous reality. The company’s financial foundation is riddled with uncertainties that could ultimately undermine its rapid ascent. In early 2024, Bloomberg cited data from Hong Kong accounting firm GMT Research estimating BYD’s net debt at an eye-popping USD 44 billion. More troubling, the report suggested BYD may be obscuring its real debt load by underreporting or delaying the recording of accounts payable—particularly commercial notes issued to suppliers.

The average maturity period for BYD’s supplier-issued notes was found to be around nine months—more than four times the industry standard of two months. This longer delay in settling payments raises red flags about the company’s cash flow management and long-term liquidity. In an environment of rising costs, intense competition, and global expansion, even a minor disruption in funding could snowball into a full-blown liquidity crisis.

These financial maneuvers paint a troubling picture: a company pursuing breakneck growth while straining its financial resilience. And it’s not just about cash flow. A significant portion of BYD’s business model relies on government subsidies and foreign investment. As one analyst warned, "Any change in policy could directly impact performance." In other words, BYD’s strategy is as exposed to political winds as it is to market forces.

This precarious balance has sparked deep division among investors and analysts. On the one hand, BYD’s pricing strategy could yield a surge in market share and global brand recognition. On the other, it risks becoming a “race to the bottom,” where rising fixed costs and plummeting margins crush long-term profitability. In such a capital-intensive industry, the combination of shrinking gross profit and mounting debt could create a financial trap from which even the most innovative firms might not escape.

Thus, what appears on the surface to be a triumph of strategy may also be a cautionary tale in the making. BYD’s aggressive push for dominance, both at home and abroad, is clearly reshaping the global EV sector. But whether it emerges as a lasting powerhouse or stumbles under the weight of its own ambition will depend on how well it can manage its expanding risk profile while maintaining its technological and pricing edge.

Korea’s Growth Forecasts Lowered by Up to 0.8 Percentage Points by Institutions
Outlook Favors Two Interest Rate Cuts Within the Year, With Focus on Supporting Growth
Concerns Grow Over Structural Stagnation Amid Declining Birthrate, Aging Population, and Slowing Productivity

South Korea, once lauded as a model of economic dynamism, now finds itself at a critical juncture. The country that once vaulted from war-torn poverty to high-tech prosperity is now facing the stark possibility of stagnation. A growing number of global institutions are sounding the alarm: South Korea may be entering an era of near-zero economic growth. In just one month, the number of international investment banks projecting South Korea’s 2025 growth in the 0% range has nearly doubled. The convergence of deep-seated structural issues—an aging population, a shrinking workforce, and weakening productivity—has accelerated this grim outlook. As policymakers and analysts weigh their options, a deeper question emerges: is zero growth no longer a possibility, but an impending reality?

Pessimism Deepens: Global Forecasts Fall Below 1%

According to a comprehensive survey compiled by Bloomberg on May 30, 30 out of 41 major global institutions, including top-tier investment banks, now expect South Korea’s economic growth rate in 2025 to fall below 1%. That number marks a dramatic rise from the 16 institutions forecasting sub-1% growth just a month earlier—nearly doubling in four weeks. The average projection among these institutions now stands at 0.985%, down sharply from 1.307% the previous month, reflecting a widespread downward revision of expectations.

The forecasted figures vary from as low as 0.3% to as high as 2.2%, but the lower end of the range has garnered the most attention. France’s Société Générale (SG) stands out with a particularly bleak estimate of just 0.3%, a full 0.5 percentage points below the Bank of Korea’s own projection of 0.8%. Over half of all surveyed institutions—21 in total—expect South Korea’s growth to remain within the 0% range. This group includes financial heavyweights like Bank of America Merrill Lynch (0.8%), Capital Economics (0.5%), Citigroup (0.6%), and HSBC (0.7%). Meanwhile, another nine institutions, such as Barclays, Fitch, and Nomura Securities, predict growth at precisely 1%.

The downward trend in outlooks is consistent across the board. Crédit Agricole slashed its forecast from 1.6% to 0.8%. HSBC cut its estimate from 1.4% to 0.7%. Singapore’s DBS Group lowered its projection from 1.7% to 1.0%. SG dropped its outlook from 1.0% to 0.3%, the lowest among all major banks. Only four institutions made minor upward revisions—Goldman Sachs, Barclays, Bloomberg Economics, and Morgan Stanley—and even those adjustments were a modest 0.1 percentage point, keeping their revised forecasts in the low 1% range.

This swift and coordinated shift toward pessimism reflects growing unease over domestic and international factors undermining Korea’s economic resilience. Soft domestic demand, sluggish exports, and the ongoing global economic slowdown have all combined to squeeze growth potential. But the most worrisome causes lie deeper—in the fabric of Korea’s demographic and productivity trends.

The Long-Term Outlook: A Nation Drifting Toward Negative Growth

Beyond short-term projections, the long-range economic picture looks even more disheartening. In its recent report titled “Potential Growth Rate Outlook and Policy Implications,” the Korea Development Institute (KDI) painted a sobering scenario for the country's future. If South Korea’s total factor productivity (TFP)—the part of economic growth attributed to innovation, efficiency, and intangible improvements beyond labor and capital—remains at its 10-year average of 0.6% (2015–2024), the nation’s potential growth rate is projected to fall to zero by 2047.

That’s not even the worst-case scenario. If structural reforms stall and productivity growth slows further to just 0.3%, the KDI warns that South Korea could slip into negative growth as early as 2041. In contrast, under an optimistic scenario where AI technology accelerates productivity and reforms gain traction, TFP growth could rebound to 0.9%, potentially sustaining modest economic growth of 0.3% by 2050.

The urgency of these projections is underscored by how quickly the outlook has darkened. In a similar report published by KDI in November 2022, the institute suggested that under a pessimistic scenario, Korea would hit zero potential growth by 2050. Just two years later, that projection has been revised forward by nearly a decade. According to KDI researchers, this dramatic shift is due to updated demographic projections and revised assumptions about productivity growth.

At the core of the problem is Korea’s worsening demographic structure. The country is experiencing one of the fastest-aging populations in the world, coupled with one of the lowest birth rates. These twin forces are shrinking the working-age population, reducing potential output, and dragging down overall productivity. Without a significant reversal in population trends or a breakthrough in technological and institutional productivity, South Korea’s economy may be on a glide path toward prolonged stagnation—or worse.

Central Bank Under Pressure: Eyes on August and November Rate Cuts

In response to the deteriorating economic outlook, attention has turned sharply toward the Bank of Korea (BOK) and its next monetary policy moves. On May 29, the BOK’s Monetary Policy Board voted to lower the benchmark interest rate by 25 basis points to 2.5%. It was a cautious but symbolic shift, acknowledging the mounting downside risks facing the economy.

Following the decision, 13 out of 15 major domestic and international securities firms predicted that the BOK would implement another rate cut as soon as August. Their reasoning is grounded in the growing likelihood of further economic deceleration and the dovish posture of the Monetary Policy Board—four out of its six members have indicated openness to another cut within the next three months. One firm projected a July cut, while another placed the likely timeline in August or October.

Kyobo Securities judged August to be the more probable timing for the next rate reduction, noting that monetary policy would likely center on managing downside growth risks in the months ahead. Kiwoom Securities cautioned that while rate cuts may stimulate demand, they could also inject excess liquidity into already frothy asset markets, particularly as household debt remains elevated. “Rather than cutting rates consecutively in July, the central bank may opt for an August cut and then pause to observe how the new government implements its policies,” Kiwoom noted.

That said, not everyone is confident that further rate cuts will come swiftly. Analysts from Shinyoung Securities and IBK Investment & Securities warned that mounting household debt and potential volatility in the foreign exchange market could delay the timing of future rate adjustments.

Despite these concerns, the majority of surveyed institutions—eight out of fifteen—expect the BOK to cut interest rates twice more this year. Most foresee the current 2.5% rate falling to 2.0% by year-end. SK Securities, for instance, predicted cuts in August and November, suggesting that the BOK will likely avoid back-to-back reductions and instead pursue a more measured pace. Meritz Securities offered a slightly different scenario: while forecasting two cuts in August and November, it projected the rate might stabilize at 2.25%, depending on shifts in U.S. monetary policy and the effectiveness of Korea’s upcoming supplementary budget.

Regardless of the precise timing, the consensus is clear—the Bank of Korea is preparing to act, and soon. Whether these interventions will be enough to counteract the growing structural and demographic challenges, however, remains to be seen.