The won-dollar exchange rate is soaring to unprecedented heights as a series of adverse factors pile up, including President Donald Trump’s reciprocal tariff announcement and delays in the impeachment ruling of President Yoon Suk Yeol.

Following Trump’s re-election in November last year, the ‘Trump Trade’ phenomenon pushed the won-dollar exchange rate past 1,400 won. By December, political uncertainties surrounding President Yoon’s martial law declaration and impeachment trial drove it further to the 1,470 won range.

On the 1st, according to the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,471.40 won, down 1.50 won from the previous day’s Seoul market close. Compared to the week’s trading session close of 1,471.90 won (9 a.m. to 3:30 p.m.), it fell by 0.50 won. Just two days prior, the rate had hit its highest level since March 13, 2009 (1,483.5 won), during the global financial crisis.

The average exchange rate for the first quarter of this year stands at 1,453 won, 16 won higher than the December average of 1,437 won last year.

The surge in the won-dollar exchange rate is largely attributed to two key factors: ▲ the Trump administration’s imposition of reciprocal tariffs and ▲ political uncertainty stemming from President Yoon’s martial law declaration and impeachment trial. The Trump administration is set to announce ‘reciprocal tariffs’ today (the 2nd), taking into account global tariffs and non-tariff trade barriers imposed on the U.S.

White House spokesperson Karoline Leavitt confirmed in a briefing that President Trump will unveil the reciprocal tariffs on the 2nd, effective immediately. Leavitt stated, “President Trump’s historic action on the 2nd will enhance U.S. competitiveness across all industries, reduce massive trade deficits, and ultimately safeguard America’s economic and national security. Starting on the 2nd, the era of America being exploited is over.”

Political uncertainty in South Korea, particularly surrounding President Yoon’s impeachment trial, is also driving the exchange rate higher. The Constitutional Court’s impeachment review, ongoing for over a month, has fueled confusion and uncertainty. The day before, when the impeachment ruling date was set, the won-dollar rate briefly dropped to 1,467.0 won, but it rebounded to the 1,470 won range as predictions of partisan conflict and extreme turmoil emerged depending on the verdict.

Experts warn that if the chaos from the impeachment trial persists and the government fails to implement stimulus measures like supplementary budget execution, economic growth could decline further, potentially pushing the exchange rate past 1,500 won. Bloomberg reported, “If Yoon’s impeachment is rejected, political gridlock could persist, complicating large-scale supplementary budget planning. Combined with external threats like Trump’s tariffs, this could increase pressure on the won (widening its weakness).”

The Korean-American community is experiencing mixed outcomes. Parents of international students, students themselves, and expatriates who rely on converting won to dollars for living expenses in the U.S. are taking a direct hit.

A UCLA student remarked, “I feel so bad for my parents that I’m planning to join the military right after this semester ends. I hope the domestic and international uncertainties calm down during my service.” As of 2023, there are approximately 39,000 Korean students studying abroad. A representative of a Korean-American tour agency said, “Demand from Korea to the Americas accounts for a significant portion of our revenue, but the high exchange rate has sharply reduced travel demand to the U.S. Meanwhile, travel to Korea often bypasses agencies, severely impacting our sales.”

Conversely, Korean-Americans are benefiting from the exchange rate surge, as travel costs to Korea have become cheaper, boosting demand for visits. It has also become more cost-effective to shop directly in Korea rather than through international online purchases, leading to active buying of items like cosmetics.

By Reporter Park Hong-yong