Korea’s manufacturing sector is expected to see its added-value growth weaken next year, eroded by the U.S. tariff shocks and intensifying competition with China, the parliamentary budget office said Monday. Meanwhile, the services sector is likely to offset the slowdown in traditional growth-driver industries in real value added.
According to a report by the National Assembly Budget Office, real added value in manufacturing is expected to grow 1.5 percent in 2026, down from 1.8 percent this year.
This is explained by the impact of U.S. tariff policies, compounded further by prolonged weakness in the construction industry.
The automotive industry is facing a grim outlook due to softening global automobile demand and new U.S. tariffs targeting a key Korean export industry. The initial tariff on Korean cars was 25 percent, but a Korea-U.S. tariff agreement reached late last month reduced it to 15 percent.
Meanwhile, real added value in the service sector is forecast to grow 2 percent next year, up from 1.4 percent this year, about 0.5 percentage points higher than in the manufacturing sector.
The positive outlook is driven by strong health care demand amid Korea’s super-aging population, as well as a recovery in the transportation and travel industries, supported by stable oil prices and rebounding domestic and international tourism, the office said.
However, higher loan repayments are adding to the burden on households amid rising debt, which could weaken consumption and weigh on service-sector growth momentum, the office added.
The report said Korea’s manufacturing value chain is at risk, as an increasing number of manufacturers are relocating production to the U.S. in response to Donald Trump’s “America First” policy.
“More Korean firms moving their manufacturing plants to the U.S. can come at the cost of weaker domestic capital spending, which in turn could translate into lower added value,” it noted. “Government policies should outline ways to attract foreign capital to Korea, through greater tax and other incentives.”
