South Korea’s economy in 2025 was shaped by sharp global shifts and major domestic policy decisions. From a long-awaited tariff deal with the United States to record-breaking stock market highs and mounting pressure on the won, the year reflected both opportunity and vulnerability. While some sectors thrived on technology and global demand, others struggled with structural headwinds and slowing consumption. Here are five of the most important economic stories that defined Korea’s economic landscape in 2025.
- Korea–US Tariff Deal Brings Relief to Exporters
After months of uncertainty, South Korea and the United States reached a critical trade agreement that eased pressure on Korean exporters. Earlier in the year, the US imposed “reciprocal” tariffs of up to 25% on key Korean products, raising concerns across industries such as automobiles and auto parts.
Negotiations stalled amid Korea’s presidential election, but talks resumed once the new administration took office. In July, the two countries reached a preliminary agreement to reduce tariffs on major Korean exports to 15%. In return, Korea committed to a large investment package in US assets.
By December, the US formally implemented the deal, retroactively applying the lower tariff rate. While discussions on digital trade rules and other non-tariff issues are ongoing, the agreement helped stabilize export sentiment and reduced the immediate risk of a deeper trade shock.
- KOSPI Crosses 4,000, Ushering in a New Market Era
One of the year’s most symbolic milestones came in October, when Korea’s benchmark stock index, the KOSPI, broke past the 4,000 mark for the first time in its 45-year history. The index had started the year near 2,400, making the rally all the more striking.
The surge was driven largely by the global artificial intelligence boom and a semiconductor supercycle. Heavy foreign inflows into market giants such as Samsung Electronics and SK hynix powered the rally, alongside optimism around government-led capital market reforms aimed at narrowing the long-standing “Korea discount.”
However, the gains were uneven. The rally was heavily concentrated in large-cap stocks, while smaller firms lagged behind. This raised concerns about volatility, foreign profit-taking and whether the headline index truly reflected broader economic health.
- The Weak Won Raises Inflation and Growth Concerns
While equities soared, the currency market told a more troubling story. In December, the won briefly weakened past 1,480 per dollar, approaching levels last seen during the 1998 Asian financial crisis. Several factors drove the decline. Korean investors and institutions increased overseas investments, while companies expanded foreign direct investment abroad. At the same time, US interest rates remained relatively high, limiting capital inflows into Korea.
A persistently weak won has mixed effects. It helps exporters but raises import costs, especially for energy, putting pressure on inflation and household purchasing power. Economists warned that short-term market intervention alone would not be enough, urging deeper reforms to strengthen growth engines and improve the structure of the current account.
- Battery Industry Faces Restructuring Amid EV Slowdown
The prolonged global slowdown in electric vehicle adoption hit Korea’s battery sector hard in 2025. Demand in key markets such as the US and Europe softened, while Chinese automakers intensified price competition.
Major battery makers – including LG Energy Solution, Samsung SDI and SK On – responded with production cuts, delayed investments, and a shift toward profitability over expansion. Factory utilization rates dropped sharply compared to post-pandemic highs.
To adapt, companies began restructuring operations. Some moved away from joint ventures toward wholly owned plants, particularly in North America. Others redirected production toward energy storage systems and lithium iron phosphate batteries, betting on steadier, subsidy-independent demand beyond electric vehicles.
- Korean Consumer Goods Shine on the Global Stage
In contrast to heavy industry struggles, Korean consumer goods enjoyed a standout year globally. Food and beauty exports surged, helped by the continued global popularity of K-content, from dramas to animation.
Exports of K-food reached record levels, driven by instant noodles, ready-to-eat rice dishes and frozen foods. Products like ramyun, kimbap and tteokbokki saw strong demand in Europe, the Middle East and North America.
K-beauty also posted record exports, surpassing $10 billion before year-end. Strong demand from the US, Japan, Southeast Asia and Europe highlighted the growing global reach of Korean brands and the soft power of cultural exports..
