Trump squeeze coming for vulnerably sandwiched South Korea

SEOUL — The Bank of Korea rarely finds itself at the center of the global economic discourse.

Yet the team led by Governor Rhee Chang-yong is on the front lines of the two biggest 2025 imponderables: the experience of the US and Chinese economies and their respective markets.

Of course, Donald Trump’s return to the White House ensures these two giants will collide, perhaps creating a third unknown: a huge trade conflict the likes of which the globe has never seen before.

Still, domestic considerations in both Washington and Beijing are already putting Rhee’s BOK on the spot. In flux are the odds of a US Federal Reserve rate cut at its November 28 policy meeting — odds that are falling by the day.

Looked at one way, the case for a Fed easing move is buttressed by signs US employment growth may be slowing and that China’s property crisis continues to generate deflation.

Korean inflation, meanwhile, is holding well below the BOK’s 2% target. As the Korea Development Institute, a state-run think tank, puts it: “tightening of monetary policy through interest rate hikes appears to have been effective in curbing high inflation since 2022.”

Yet Rhee’s decision is complicated by trends at home, particularly near-record household debt levels.

“The central bank faces a challenging situation of slower domestic demand and inflation below target, which typically calls for rate cuts,” says Ashok Bhundia, an economist at the Institute of International Finance. “However, concerns about financial stability due to high household leverage complicate the decision.”

Bhundia’s bottom line is that “delaying the next rate cut will allow more time for evaluating the incoming US administration’s policy agenda and its potential impact on global