South Korea’s factory activity contracted in October as U.S. tariffs weighed on manufacturers. The S&P Global South Korea Manufacturing Purchasing Managers’ Index (PMI) fell from 50.7 in September to 49.4 in October, indicating further stress in Asia’s fourth-largest economy at the start of the final quarter of 2025.
The PMI data released on November 3 revealed that companies reported lower output and new order intakes, while employment levels fell fractionally for the first time in three months. In October, manufacturers frequently cited the effects of U.S. tariffs and the sluggish domestic economy as factors influencing demand and production. The report emphasized that demand and production also impacted manufacturers’ purchasing decisions and inventory levels.
U.S. tariffs drive up costs for manufacturers
On the price front, the PMI statistics from October showed that rising raw material prices were the primary cause of a significant increase in input costs. Companies noted that tariffs and a weak currency rate have led to higher price pressures on foreign-sourced inputs. According to the PMI report, the rate of input price inflation stayed higher than the series average even as it eased to a four-month low. The report claimed that, due to the necessity of passing on increased costs to consumers, output charges were raised for the eleventh consecutive month, albeit at the slowest rate in three months.
S&P Global analyst Usamah Bhatti commented that the improvement observed towards the end of the third quarter “largely evaporated” in October. He noted that domestic demand faltered and new export orders, particularly from the United States, resumed their decline.
“Manufacturers noted that tariffs further impacted the sector, as new export orders fell into decline again, particularly emphasizing the decrease in U.S. export demand.”
–Usamah Bhatti, Economist at S&P Global Market Intelligence.
Bhatti explained that historical high inflationary pressures had persisted, with foreign raw material prices frequently rising due to unfavorable exchange rate fluctuations. He claimed that the outlook for the coming months appears mixed.
Trump and Lee trade pact reshapes U.S.–Korea relations
The downturn came just after South Korean President Lee Jae Myung and U.S. President Donald Trump reached an agreement on October 29 to set a 15% ceiling on U.S. tariffs on Korean automobiles and auto parts.
Trump and South Korea struck an initial trade deal in July, with South Korea announcing plans to invest $350 billion in the U.S. South Korea also planned to spend approximately $100 billion on liquefied natural gas as part of the initial trade agreement with Trump. In return, Trump promised to reduce the initial 25% tariff imposed on South Korea to 15%.
Kim Yong-beom, Lee’s chief of staff for policy, revealed that $200 billion of the $350 billion will be paid in cash installments, capped at $20 billion per year. The remaining $150 billion will be used for investments in shipbuilding.
As previously reported by Cryptopolitan, Kim claimed that the planned payment schedule enables the Korean side to control currency stability while maintaining a long-term commitment to the entire investment amount. Kim explained that the $20 billion annual cap is a step to safeguard local economies as industrial cooperation continues.
U.S. and Korean companies will collaborate on production and technology in the shipbuilding section of the deal. Kim emphasized that Korean shipyards will continue to dominate the shipbuilding sector. South Korea claims that until the initial investment is recovered, the profits will be divided 50/50.
The White House published a fact sheet late Saturday that included further information regarding the trade deal that was negotiated last week in South Korea between President Trump and Chinese President Xi Jinping.
According to the White House’s new release, China will halt its probes into U.S. semiconductor makers and refrain from imposing export bans on rare earth metals. The U.S. will postpone plans to impose a 100% tax on Chinese exports to the U.S., which were scheduled to take effect this month. The United States will also postpone some of Trump’s “reciprocal tariffs” on China for an additional year.
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