[Editorial] Recession fears

Recession fears escalated as US President Donald Trump declined to explicitly rule out a recession in the US economy this year.

"I hate to predict things like that. There is a period of transition, because what we're doing is very big," he said, responding to question about whether he was expecting a recession in the US this year in a Fox News interview Sunday, "And there are always periods of, it takes a little time."

This remark was interpreted to mean that Trump is willing to risk a recession to get his intended effect, particularly with his tariff push.

US stocks plunged Monday. The Dow tumbled nearly 900 points. The tech-heavy Nasdaq fell 4 percent ― the biggest drop by percentage since Sept. 13, 2022.

The US is South Korea's second-largest export market. If the US economy staggers, the South Korean economy will be hit hard.

Tariffs are typically imposed as a percentage of the price of imported goods. It is a widely accepted theory that they are eventually passed on to consumers.

Trump's tariff bomb on all US trading partners will stimulate inflation, raising the risk of stagflation where prices rise amid a recession. US consumer prices rose 3 percent in January, the most in nearly a year and a half .

The Trump administration began to levy tariffs on steel and aluminum on Wednesday and it seeks to impose what the US president argues are "reciprocal tariffs" on a country-by-country basis from April 2.

If the tariff war grows in intensity, supply chains will likely wobble and corporate investment sentiment will contract. A growth slowdown would be inevitable.

To make matters worse, Trump's erratic trade policies add to overall uncertainty.

The prevailing forecast for US economic growth for this year is that it will fall far short of last year's 2.8 percent.

Recently, Goldman Sachs slashed its 2025 GDP forecast for the US to 1.7 percent from 2.4 percent.

JP Morgan Chase turned their economic outlook more pessimistic and raised the probability of a US recession this year from 30 percent to 40 percent.

The Federal Reserve Bank of Atlanta estimated that the US' first-quarter GDP may decline by 2.4 percent, which would be the first quarterly contraction in the US since 2022.

The International Monetary Fund cautioned in its World Economic Outlook that if higher tariffs hit a “sizable swath” of world trade by mid-2025, it would wipe away 0.8 percent from economic output this year globally.

The problem is that if the US economy is rattled, the export-driven South Korean economy will be jolted.

South Korea's exports declined 4.7 percent in January and February from the same period last year.

The Korea Institute for International Economic Policy forecast that if there is a full-blown global tariff war, the country's exports will plummet by as much as $44.8 billion.

The Bank of Korea has already curtailed its 2025 South Korean growth forecast to 1.5 percent from 1.9 percent. If the US sinks into recession, its growth will likely fall closer to zero percent.

South Korea's economy is in dire straits.

According to Statistics Korea, the number of self-employed owners of small businesses fell to 5.5 million in January, below the figure of 1998, a year after Korea was hit by the foreign exchange crisis and sought a bailout from the IMF.

The number of new claims on unemployment benefits increased 25.1 percent on-year to 117,000 in February.

With consumers tightening their belts, educational expenses for children, which are regarded as the "last bastion" of household spending, decreased for the first time in four years in January.

First of all, domestic demand should be revived. A supplementary budget is urgently needed to kick-start the nation's economy.

Even though it is beleaguered by difficulties at home and abroad, signs of politicians alleviating Korea's political turmoil are nowhere in sight.

After President Yoon Suk Yeol was impeached in December, the ruling and main opposition parties agreed to resolve urgent state affairs through consultations with the government, but proper three-way meetings have not been held due to the tumult over his impeachment trial, the ruling for which remains pending.

They should resume consultations as soon as possible to process a supplementary budget and other pressing economic bills.