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Once blithely dominant in China, European automakers are now launching full-fledged charm offensives at consumers in the world’s largest car market, seeking to claw back sales lost to domestic rivals.At this week’s Auto Shanghai, the largest global industry show of its kind, foreign firms — in particular legacy German ones — pitched dozens of electric, high-tech models made “in China for China”. Volkswagen, the largest foreign automaker operating in the country, announced that by 2027 it would release more than 20 new cars for the local market. “There is still a huge opportunity for the German brands to make a comeback, but with each day without a truly tech-defined car (like Chinese rivals) it seems unlikely,” EV specialist Elliot Richards told AFP. Volkswagen entered the Chinese market through a joint venture when it first opened up, swiftly taking the lion’s share. Forty years later though, dozens of ultra-competitive homegrown car brands have blossomed. The Chinese government’s strategic support for the EV and hybrid sector has seen many domestic firms become world leaders in that area. BYD, Geely, Dongfeng and others took 65 percent of the local market in 2024, up 22.2 percent year-on-year, data from MarkLines shows. German brands’ share decreased by 10.8 percent in the same year. Other European brands like Renault still manufacture some cars in China, but have withdrawn from the local market. For those still in the game, holding ground in China is essential, as Europe’s market weakens and US President Donald Trump complicates access to the United States with his tariff policy.- ‘Turning a big ship’ -“Decades ago, it was very easy to develop, to produce one standard, and to provide it globally,” Volkswagen CEO Oliver Blume said at Auto Shanghai. “Today it’s impossible.”To adapt to an increasingly sophisticated and monied Chinese consumer base, firms have employed a variety of tactics. “German carmakers have invested heavily into their competitiveness in order to catch up with Chinese brands in the areas of electrification, intelligent vehicles and market responsiveness,” European Chamber Vice President Stefan Bernhart told AFP. Volkswagen works closely with domestic giants FAW, SAIC and JAC, and recently added Xpeng, a startup known for its tech proficiency, to its list of partners. Stellantis produces cars in China notably through its alliance with Leapmotor, another Chinese startup. Brands are also boosting local research and development staffing and investment, and increasing their output to what Volkswagen calls “China Speed”. Even as it considers layoffs in Europe, Volkswagen has reinforced its development capacity in China, planning to release its new models in 18 months and save 40 percent of the costs. “Turning a big ship around takes effort, commitment, and also some sacrifices,” Brian Gu, XPeng’s co-president, told AFP. “But I see they’re very committed to change.”- Mercedes versus Nio -Until 2023, luxury European behemoths like Mercedes and BMW could still count on the fact their cars were seen as status symbols, according to consultancy Inovev. Their sales slipped last year though, as the prestige of local brands like Nio and individual models like Xiaomi’s SU7 has risen. At Auto Shanghai, Mercedes presented a long version of its new electric star, the CLA, as well as a luxury minivan aimed at the rich Chinese leisure set. CEO Ola Kallenius was bullish about prospects in what he called the “world’s most competitive market”. He pointed to features targeted at local customers, including an advanced driver assistance system, as well as giant screens, as Chinese drivers “use (their car) as an entertainment space”. Porsche is also betting on its cachet — announcing this week it will concentrate on higher value sales rather than volume. However, with Chinese competitors slashing prices but not quality, consumers are no longer as willing to pay a premium for Western brands, according to Inovev.  “The name of the game is value,” said Tu Le, founder of Sino Auto Insights. “Chinese consumers between the age of 30 and 45 are going into showrooms, looking at Mercedes, looking at Nio, and buying that Nio instead.” But EV specialist Richards warned against complete gloom: “Nothing is certain in the automotive space, especially in China, and everything is still up for grabs.” 

A rally on global stock markets fizzled Thursday as China poured cold water on US President Donald Trump’s comments talking up the prospects of a deal to end their trade war.It follows a jump in markets the previous day as Trump signalled that tariffs on China could be substantially lowered and that the United States would have a “fair deal” on trade with Beijing.But China on Thursday said any claims of ongoing trade talks with Washington were “groundless”.Treasury Secretary Scott Bessent also tempered optimism, saying the two countries are “not yet” talking when it comes to lowering tariffs.”The investing world is back to hanging onto every word out of the White House, but with such a confusing and often contradictory stance on tariffs, volatility is all we can really guarantee,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.City Index and FOREX.com analyst Fawad Razaqzada said that “until we see meaningful resolution on the tariff front, it may well be the case that markets remain in a choppy environment with larger-than-usual swings.”Wall Street opened mixed, while European equities were lower in afternoon trading.In Asia, Tokyo closed 0.5 percent higher, while Shanghai ended flat and Hong Kong fell almost one percent.Seoul fell after official data showed South Korea’s economy unexpectedly contracted 0.1 percent in the first three months of 2025.The dollar weakened as White House uncertainty boosted demand for the Swiss franc, the yen and gold, seen as safe-haven assets.Bessent also said that in its talks with Japan on tariffs, Washington had “absolutely no currency targets”, after repeated comments from Trump that he wants a stronger yen.Meanwhile investors are also looking to a series of company results for signs of how tariffs may weigh on the outlook for the year ahead.”Comments about tariffs from business leaders are omnipresent and investors want to know how companies plan to deal with potential cost pressures,” said Russ Mould, investment director at AJ Bell.Shares in consumer goods manufacturer Procter & Gamble slumped 3.5 percent after it cut its sales and profit forecasts, citing a pullback by consumers amid the tariff and economic uncertainty.Shares in its British rival Unilever shed 0.5 percent although it said the impact of US tariffs on its products would be “limited”, as it reported a dip in first-quarter revenue.Shares in Pepsi slid 1.8 percent after it too cut its 2025 sales and profit forecasts.Japanese auto giant Nissan predicted an enormous loss of around five billion dollars this year as US President Donald Trump’s tariffs on car imports hit the industry.In Paris, shares in luxury group Kering fell 2.5 percent after it reported a further sales slump at its flagship Gucci brand.In Frankfurt, German sportswear giant Adidas gained around three percent as its profit almost doubled in the first quarter, beating expectations.Meanwhile Nintendo shares gained as much as 5.5 percent after the gaming giant boasted of higher-than-expected demand in Japan for pre-orders of its Switch 2 game console.- Key figures at 1330 GMT -New York – Dow: DOWN 0.4 percent at 39,462.82 pointsNew York – S&P 500: UP less than 0.1 percent at 5,379.94New York – Nasdaq Composite: UP 0.3 percent at 16,755.08London – FTSE 100: DOWN 0.3 percent at 8,375.18Paris – CAC 40: DOWN 0.1 percent at 7,473.14Frankfurt – DAX: DOWN 0.2 percent at 21,913.61Tokyo – Nikkei 225: UP 0.5 percent at 35,039.15 (close)Hong Kong – Hang Seng Index: DOWN 0.7 percent at 21,909.76 (close)Shanghai – Composite: FLAT at 3,297.29 (close)Euro/dollar: UP at $1.1377 from $1.1317 on WednesdayPound/dollar: UP at $1.3305 from $1.3257Dollar/yen: DOWN at 142.40 from 143.49 yenEuro/pound: UP at 85.51 from 85.34 penceWest Texas Intermediate: UP 0.9 percent at $62.82 per barrelBrent North Sea Crude: UP 0.7 percent at $65.65 per barrelburs-rl/jhb

The road ahead looks treacherous for Nissan after the Japanese auto giant predicted an enormous loss just as US President Donald Trump’s tariffs on car imports hit the industry.Nissan on Thursday warned it expected to have posted a loss of 700-750 billion yen ($4.9-$5.3 billion) in the business year that ended in March, blaming asset writedowns and restructuring costs.”Despite these challenges, we have significant financial resources, a strong product pipeline and the determination to turn around Nissan in the coming period,” the company promised.But investors are unlikely to be reassured.Nissan, one of the top 10 automakers by unit sales with roots going back over a century, is heavily in debt and lacking a clear next move after a mooted merger with rival Honda collapsed.In March, the chief executive quit and investors have driven for the hills, sending Nissan shares down by more than 40 percent over the past year. – Job cuts -Nissan has lurched from crisis to crisis in recent years, with the dramatic arrest of former boss Carlos Ghosn — who escaped Japan in a musical instrument box — the Covid pandemic and the Ukraine war.It has an uninspiring product line, including in electric cars, especially in China where unit sales tumbled 24.1 percent in the 2023 financial year.On Wednesday, it announced investments of 10 billion yuan ($1.4 billion) into China, and said it would raise the number of new models it planned to launch by summer 2027 to 10, up from eight.”We were not at the same speed, mainly because the Chinese brands were exceptional with speed,” Nissan’s China chief Stephen Ma said at the Auto Shanghai industry show.Last year, Nissan announced 9,000 job cuts worldwide and that it was slashing production capacity by 20 percent.In February, talks with Honda on merging to create the world’s third-biggest automaker by number of vehicles collapsed. The negotiations had also involved Mitsubishi Motors. This prompted Moody’s to cut its credit rating on Nissan to junk, citing “weak profitability driven by slowing demand for its ageing model portfolio”.- Options limited -Now, to make matters worse, since April, the United States has imposed a 25-percent surcharge on all imported vehicles.Bloomberg Intelligence analyst Tatsuo Yoshida told AFP that Nissan will be the most severely impacted of all major Japanese automakers.Last year, Nissan generated 30 percent of its revenues in the United States, selling 924,000 vehicles there, 45 percent of them imported from Japan and Mexico.If Nissan absorbs the full impact of the tariffs without passing costs to the market or customers, this would mean a loss of 440 billion yen ($3.1 billion), Yoshida calculates.To hedge, Nissan is tweaking its production.This includes reversing plans to reduce output at its Tennessee plant and stopping sales in the United States of two models made in Mexico.But more drastic measures could be needed, including shifting production wholesale from Mexico and Japan to the United States.But this will take time, even assuming Nissan has spare factory capacity in America.”Transferring production means creating capacity, tooling, finding suppliers,” an industry source told AFP. “To achieve anything significant, it will take at least two years.”In any case, given the unpredictability of Trump’s policies, analysts said it was unlikely that Nissan — or any Japanese automaker — would announce any major shift for now.- Hon Hai help? -“If this situation goes on forever, it can be a death blow for Nissan, in a sense that it will run out of cash and default,” Yoshida said before Thursday’s profit warning.But he added that if this happens, he expects a financial partner to come to the rescue, in the shape of Honda or a technology firm like Apple.In February, Nissan shares briefly surged on a reported push to bring Elon Musk’s Tesla on as an investor.Reports in December said Taiwan’s Foxconn — also known as Hon Hai, which assembles iPhones and wants to move into cars — had approached Nissan to buy a majority stake.jug-tmo-tsz-stu/sco

Struggling Japanese auto giant Nissan issued a stark profit warning on Thursday, forecasting a huge loss of up to $5.3 billion in the 2024-25 financial year.One of the top 10 automakers by unit sales, Nissan is heavily in debt, having trouble selling vehicles in the Chinese market, and like its peers faces a potential body blow from US President Donald Trump’s vehicle tariffs.”We are taking the prudent step to revise our full-year outlook, reflecting a thorough review of our performance and the carrying value of production assets,” chief executive Ivan Espinosa said in a statement.”We now anticipate a significant net loss for the year, due primarily to a major asset impairment and restructuring costs as we continue to stabilise the company,” he said.”Despite these challenges, we have significant financial resources, a strong product pipeline and the determination to turnaround Nissan in the coming period.”Nissan — which will announce its earnings in mid-May for the 2024-25 financial year that ended on March 31 — said it expects to report a full-year net loss of 700-750 billion yen ($4.9 billion-$5.3 billion).In February, the company had projected a much smaller annual net loss of 80 billion yen ($560 million).Nissan has lurched from crisis to crisis in recent years as it was hit by the arrest of former boss Carlos Ghosn, the Covid pandemic and the Ukraine war.Last year, it announced 9,000 job cuts worldwide as it reported a 93 percent plunge in first-half net profit.Then merger talks with its rival Honda — seen as a bid to catch up with Tesla and Chinese electric vehicle firms — collapsed in February.Those discussions unravelled after Honda proposed to make its struggling competitor a subsidiary instead of a previously announced plan to integrate under a new holding company.- Junk rating -Nissan’s shares have shed more than 40 percent of their value over the past year, and in March, the company’s then-CEO Makoto Uchida said he was stepping down.Meanwhile ratings agencies have cut Nissan’s credit rating to junk, with Moody’s citing “weak profitability driven by slowing demand for its ageing model portfolio”.This financial year has not proved any easier so far — since April, the United States has imposed a 25-percent surcharge on all imported vehicles.Bloomberg Intelligence analyst Tatsuo Yoshida told AFP ahead of Thursday’s profit warning that Nissan would be the most severely impacted by the US tariffs of all major Japanese automakers, calling the impact “huge”.Last year, Nissan generated 30 percent of its revenues in the United States, selling 924,000 vehicles there, 45 percent of them imported from Japan and Mexico.The company could try to sell more cars in other regions, such as Southeast Asia, but Yoshida warned that “if this situation goes on forever, it can be a death blow for Nissan, in a sense that it will run out of cash and default”.But if this happens, he expects a financial partner to come to the rescue, either Honda or a technology firm like Apple.In February, Nissan shares briefly surged on a reported push to bring Elon Musk’s Tesla on as an investor.Reports in December said Taiwan’s Foxconn, which assembles iPhones and wants to move into cars, had approached Nissan to buy a majority stake.It then reportedly asked Renault to sell its 35 percent stake in Nissan, the legacy of a bumpy alliance with the French group dating back to 1999.

Stock markets were mostly lower on Thursday as China poured cold water on US President Donald Trump’s comments talking up the prospects of a deal to end their trade war.It follows a rally in markets the previous day as Trump signalled that tariffs on China could be substantially lowered and that United States would have a “fair deal” on trade with Beijing.But China on Thursday said any claims of ongoing trade talks with Washington were “groundless”.Treasury Secretary Scott Bessent also tempered optimism saying that the two countries are “not yet” talking when it comes to lowering tariffs.”The investing world is back to hanging onto every word out of the White House, but with such a confusing and often contradictory stance on tariffs, volatility is all we can really guarantee,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.European equities fell on Thursday, with investors also looking to a series of company results for signs of how tariffs may weigh on the outlook for the year ahead.”Comments about tariffs from business leaders are omnipresent and investors want to know how companies plan to deal with potential cost pressures,” said Russ Mould, investment director at AJ Bell.The dollar weakened as White House uncertainty boosted demand for the Swiss franc, the yen and gold, seen as safe-haven assets.In Asia, Tokyo closed 0.5 percent higher, while Shanghai ended flat and Hong Kong fell almost one percent.Bessent also said that in its talks with Japan on tariffs, Washington had “absolutely no currency targets”, after repeated comments from Trump that he wants a stronger yen.Seoul fell after official data showed South Korea’s economy unexpectedly contracted 0.1 percent in the first three months of 2025.On Wall Street, the broad-based S&P 500 finished 1.7 percent higher on Wednesday. In company news, struggling Japanese auto giant Nissan issued a stark profit warning on Thursday. Meanwhile Nintendo shares gained as much as 5.5 percent after the gaming giant boasted of higher than expected demand in Japan for pre-orders of its Switch 2 game console.  French software company Dassault Systemes dropped around seven percent in Paris after its net profit declined and it cut its 2025 annual operating margin forecast.Luxury group Kering fell around four percent in Paris after reporting a further sales slump at its flagship Gucci brand.Also in Paris, carmaker Renault gained around two percent as it announced plans to further cut costs as US tariffs shake up the global car market while reporting a slight increase in sales volumes.In Frankfurt, German sportswear giant Adidas gained around three percent as its profit almost doubled in the first quarter, beating expectations.- Key figures at 1100 GMT -London – FTSE 100: DOWN 0.1 percent at 8,399.18 pointsParis – CAC 40: DOWN 0.2 percent at 7,464.88Frankfurt – DAX: DOWN 0.3 percent at 21,907.84Tokyo – Nikkei 225: UP 0.5 percent at 35,039.15 (close)Hong Kong – Hang Seng Index: DOWN 0.7 percent 21,909.76 (close)Shanghai – Composite: FLAT at 3,297.29 (close)New York – Dow: UP 1.1 percent at 39,606.57 (close)Euro/dollar: UP at $1.1383 from $1.1317 on WednesdayPound/dollar: UP at $1.3307 from $1.3257Dollar/yen: DOWN at 142.48 from 143.49 yen  Euro/pound: UP at 85.57 from 85.34 pence West Texas Intermediate: UP 1.2 percent at $63.02 per barrelBrent North Sea Crude: UP 1.1 percent at $65.88 per barrelburs-ajb/rl

Asian markets were mixed on Thursday as China poured cold water on US President Donald Trump’s comments talking up the prospects of a deal to end their trade war.Trump said on Wednesday that Washington would have a “fair deal with China” and that there was direct contact “every day”. On Tuesday he had said tariffs would “come down substantially”.But China said on Thursday that there were no negotiations ongoing.”Any claims about the progress of China-US economic and trade negotiations are groundless and have no factual basis,” Commerce Ministry spokesman He Yadong told a news conference.”China urges the United States to correct its wrong practices, show the sincerity needed for talks (and) return to the correct track of equal dialogue and consultation,” He said.On Wednesday Trump’s comments, as well as his insistence that he has “no intention” of firing the head of the US Federal Reserve, Jerome Powell, boosted markets.The broad-based S&P 500 finished 1.7 percent higher on Wednesday. European markets also rose but in early trade on Thursday headed lower, with Frankfurt down over a percent.Trump could also exempt car parts from some tariffs on China alongside those on steel and aluminium in a “destacking”, the Financial Times reported.On Thursday Tokyo pared back earlier gains to close 0.5 percent higher, while Sydney added 0.6 percent and Shanghai ended flat. Taiwan and Hong Kong’s Hang Seng fell almost a percent.Seoul fell after official data showed South Korea’s economy unexpectedly contracted 0.1 percent in the first three months of 2025.”Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased,” said Hubert de Barochez at Capital Economics.”But the fact that the rally was sparked largely by conciliatory remarks from US President Trump — whose rhetoric is notoriously volatile — raises questions about its durability,” de Barochez said.On trade, Washington has imposed additional tariffs of 145 percent on a range of products from China, while Beijing has retaliated with levies of 125 percent on US goods.Treasury Secretary Scott Bessent told reporters on Wednesday that Washington is “not yet” speaking with Beijing on tariffs, calling the high levies not “sustainable”. Bessent also said that in its talks with Japan on tariffs, Washington had “absolutely no currency targets”, after repeated comments from Trump that he wants a stronger yen.Japan’s envoy Ryosei Akazawa met Trump and other senior US officials last week, and local media reported Thursday that he will return for another round on May 1.Nintendo shares gained as much as 5.5 percent after its president said there were “extremely high” pre-orders in Japan for its Switch 2 game console ahead of its global launch on June 5.  – Key figures at 0830 GMT -Tokyo – Nikkei 225: UP 0.5 percent at 35,039.15 (close)Hong Kong – Hang Seng Index: DOWN 0.7 percent 21,909.76 (close)Shanghai – Composite: UP 0.03 percent at 3,297.29 (close)Euro/dollar: UP at $1.1373 from $1.1317 on WednesdayPound/dollar: UP at $1.3297 from $1.3257Dollar/yen: DOWN at 142.69 from 143.49 yen  Euro/pound: UP at 85.53 from 85.34 pence West Texas Intermediate: UP 0.74 percent at $62.73 per barrelBrent North Sea Crude: UP 0.64 percent at $66.54 per barrelNew York – Dow: UP 1.1 percent at 39,606.57 (close)London – FTSE 100: DOWN 0.35 percent at 8,374.17burs-stu/sco

Asian markets were mixed on Thursday after President Donald Trump said he had “no intention” of firing the US central bank head and made conciliatory comments on his trade war with China.Trump’s attacks on the Federal Reserve for not cutting interest rates had raised fears that he would fire its “Mr. Too Late” chief Jerome Powell, in a major blow to its independence.Trump’s rowback on Wednesday boosted Wall Street, as did his comments that US tariffs on China were “very high” and would “come down substantially”.The broad-based S&P 500 finished 1.7 percent higher on Wednesday. European stocks also rallied, with Frankfurt gaining more than three percent.Trump could also exempt car parts from some tariffs on China alongside those on steel and aluminum in a “destacking”, the Financial Times reported.Tokyo rose more than one percent, while Sydney added 0.6 percent and Shanghai 0.3 percent.But Seoul fell after official data showed South Korea’s economy unexpectedly contracted 0.1 percent in the first three months of 2025.Hong Kong and Taipei were also slightly down.”Both US equities and government bonds have staged a relief rally over the past 24 hours, as concerns about Fed independence and the trade war have eased,” said Hubert de Barochez at Capital Economics.”But the fact that the rally was sparked largely by conciliatory remarks from US President Trump — whose rhetoric is notoriously volatile — raises questions about its durability,” de Barochez said.On trade, Washington has imposed additional tariffs of 145 percent on a range of products from China, while Beijing has retaliated with levies of 125 percent on US goods.Treasury Secretary Scott Bessent told reporters on Wednesday that Washington is “not yet” speaking with Beijing on tariffs, calling the high levies not “sustainable”. Bessent also said that in its talks with Japan on tariffs, Washington had “absolutely no currency targets”, after repeated comments from Trump that he wants a stronger yen.Japan’s envoy Ryosei Akazawa met Trump and other senior US officials last week, and local media reported Thursday that he will return for another round on May 1.Nintendo shares gained as much as 5.5 percent after its president said there were “extremely high” pre-orders in Japan for its Switch 2 game console ahead of its global launch on June 5.  – Key figures at 0300 GMT -Tokyo – Nikkei 225: UP 1.9 percent at 34,868.63 (break)Hong Kong – Hang Seng Index: DOWN 0.23 percent 22,022.77Shanghai – Composite: UP 0.26 percent at 3,304.97 Euro/dollar: UP at $1.1351 from  $1.1317 on WednesdayPound/dollar: UP at $1.3281 from $1.3257Dollar/yen: DOWN at 142.78 from 143.49 yen  Euro/pound: UP at 85.47 from 85.34 pence West Texas Intermediate: DOWN 0.05 percent at $62.24 per barrelBrent North Sea Crude: UNCHANGED at $66.12 per barrelNew York – Dow: UP 1.1 percent at 39,606.57 (close)London – FTSE 100: UP 0.9 percent at 8,403.18 (close)burs-stu/tc/tym

Australia will stockpile critical minerals in a new strategic reserve, Prime Minister Anthony Albanese said Thursday, as nations scramble to source rare earths and coveted metals outside China. Mining superpower Australia sits on bulging deposits of lithium, nickel and cobalt — metals used in everything from smartphones to electric vehicles. But most of this boon is sold as raw ore to processing factories in China, which has a chokehold on the global supply of finished critical minerals. Albanese said Australia would start stockpiling these commodities at home, striking deals to sell them to other “key partners”. “Increasingly uncertain times call for a new approach to make sure Australia maximises the strategic value of critical minerals,” he said in a statement.”We need to do more with the natural resources the world needs, and that Australia can provide.”Australia would initially set aside Aus$1.2 billion (US$760 million) to get the reserve up and running. Albanese’s government has previously suggested Australia could use its critical minerals as a bargaining chip in tariff talks with the United States. Australia sits on some of the largest lithium deposits in the world, and is also a leading source of lesser-known rare earth metals such as neodymium.Major manufacturing nations such as the United States, Germany and Japan are eager to obtain these critical minerals from sources other than China. Japan has its own critical minerals stockpile, while the United States has been investing in metals refineries and other processing technology. – Rare earth ransom -“The ability for the government to stockpile is an important safeguard against market pressure, as well as interventions from other nations,” Albanese said in a speech later on Thursday.”It means Australia has the power to sell at the right time to the right partners for the right reasons.”Critical minerals loom as a likely new front in the unfolding trade war between Washington and Beijing. US President Donald Trump last week ordered a probe that could result in new tariffs targeting China.Trump’s order stated that the United States was dependent on foreign sources of critical minerals, putting its military and energy infrastructure at risk.China has shown a willingness to hold rare earths to ransom in the past. At the height of a diplomatic dispute in 2010, China effectively banned the export of rare earths into Japan. The move rattled Japan’s car-making industry, which was heavily reliant on certain rare earth alloys to build magnets used in motors. China controls some 90 percent of the world’s supply of rare earths — a subset of critical minerals — and is fiercely protective of its position. Beijing has banned the export of processing technology that could help rival nations, and has been accused of using state-imposed quotas to control supply. 

South Korea’s economy unexpectedly contracted 0.1 percent in the first three months of this year, the country’s central bank said Thursday, as the Asian export giant reels from months of political chaos and heightened trade tensions. US President Donald Trump’s threatened 25 percent “reciprocal” tariffs on export-dependent South Korea have rattled Asia’s fourth-largest economy, sending Seoul-listed shares tumbling and pushing the currency to its weakest level since 2009. The country is also still emerging from a political crisis triggered by former president Yoon Suk Yeol’s December attempt to suspend civilian rule, which culminated in his impeachment and removal from office this month.”Real gross domestic product (GDP) fell by 0.1 percent compared to the same period last year,” the central bank said, adding that it contracted by 0.2 percent from the previous quarter. “Two developments hit confidence and the economy — fallout from former President Yoon Suk Yeol’s failed martial law attempt and worries about shifts in US trade policies,” said Hyosung Kwon, an economist at Bloomberg Economics. “Looking ahead, we see the economy rebounding in the second quarter of this year, helped by easing political uncertainty at home. But the recovery will likely remain fragile as elevated US tariffs weigh on external demand,” Kwon added.- Dented exports -The country’s economy expanded 1.3 precent in the first quarter of last year but grew less than expected in the fourth quarter, as the fallout from Yoon’s declaration of martial law hit consumer confidence and domestic demand.According to the Korea Customs Service, as of mid-April, the country’s exports had dropped by more than 5 percent compared to the previous year, with declines reported in nine out of the country’s ten major export categories excluding semiconductors. The sharpest fall was in exports to the United States, which plunged by more than 14 percent. The International Monetary Fund this week sharply revised down its growth forecast for South Korea for the year,  cutting it from 2.0 percent to 1.0 percent. “The South Korean economy is facing structural burdens of high inflation and a weak won-dollar exchange rate, and under this dual pressure, a slowdown in growth is becoming increasingly evident,” Kim Dae-jong, a professor at Sejong University, told AFP.Bank of Korea governor Rhee Chang-yong said last week the country’s annual growth rate is now “expected to fall short of the 1.5 percent forecast made in February”.”The tightening of tariff policies, which is much stronger than initially projected, will likely further weigh on growth prospects,” he told reporters in a press conference.He added that “political uncertainty has dragged on longer than expected, delaying the recovery of economic sentiment.” Sluggish domestic demand, along with factors such as large-scale wildfires which tore through swaths of the country’s southeast in late March, had also contributed to the downturn, Rhee said.Addressing parliament, acting president Han Duck-soo underlined “significant” challenges by South Korea.”Unprecedented US-driven tariff policies have created a level of uncertainty that is causing rapid and unpredictable shifts in the global economic landscape,” Han told the National Assembly.US tariffs on steel and automobiles, as well as broader levies imposed by Trump on other goods, are expected to “place considerable strain on Korean industries and businesses,” added Han. 

A year ago Zhang Chundong helped the firm he manages expand into Vietnam, part of a wave of Chinese businesses to choose the booming manufacturing hub since the trade war of US President Donald Trump’s first term.Now the company — a distributor of forklifts made by China’s BYD — is struggling to achieve the fast growth it expected as factory projects stall, and Vietnam waits to see if an enormous 46 percent tariff threatened by Trump this month will materialise.”Some factories that we received orders from are almost ready for operation, but since the tariff news, we got notice that projects and the purchasing of our forklifts are on hold,” said Zhang, manager at Huochacha New Energy Group, whose clients in Vietnam include Chinese electronics company TCL.”We should be in a stage of a rapid growth… (but) due to the tariffs, we are not,” he told AFP.Many Chinese businesses in Vietnam, particularly those exporting directly to the United States, in theory find themselves in a better position than they would be at home, with Beijing already facing levies of up to 145 percent on many products.Hanoi — like much of the rest of the world — has been hit with a blanket 10 percent tariff and has a short window before delayed reciprocal levies come into force in July. There’s still hope that the figure can be negotiated down.But in Vietnam’s northern industrial Bac Ninh province, Chinese businesses that AFP interviewed — most of whom are linked to the export supply chain — said investors were hesitating and anxiety was widespread.Zhang, 39, said he had confidence in the negotiations but explained that three or four of the firm’s projects were on hold.”I’ve talked with a few clients… and the answers at the moment are all the same, we need to keep waiting.” – Investment surge -In Bac Ninh, around 40 kilometres from Hanoi by road, restaurants, massage parlours and convenience stores with Chinese signs jostle for space with Korean shops and eateries.South Korea has long been a huge investor in Vietnam, with electronics giants such as Samsung and LG both in Bac Ninh — but China is fast catching up.Around 10,000 Chinese people lived in the province by the end of 2023, the latest figure available, and expats in the area said the figure had likely surged since then. “In recent years, Vietnam’s economy has been developing, and China and US keep having trade friction, so many companies that were hesitant before came to Vietnam these two years,” said Wang Hongxin, 40, who moved to Vietnam more than a decade ago to work with a Samsung supplier.One of them is Vietnam Kepai, a Chinese firm which makes computer numerical control machines and expanded into Bac Ninh last month, in search of new markets and to escape fierce competition back home.”There are many companies that are successful in China hoping to explore the market in Vietnam. I’ve heard this conversation so many times in Chinese restaurants (here),” said Li Pingwu, the firm’s 33-year-old manager.The nation ranked third among Vietnam’s top investors in 2024, behind only Singapore and South Korea, with a more than three percent jump compared to the previous year. It also led in terms of new investment projects, representing more than a quarter of all newly registered initiatives.- Hours cut -This influx is what appeared to provoke Trump as he announced huge tariffs on Vietnam in early April, with Washington accusing the country of facilitating Chinese exports to the United States and allowing Beijing to get around tariffs.Although a 2024 report by the International Monetary Fund said there was “no clear evidence” of Vietnam’s role in facilitating Chinese exports to the United States, manager Zhang admitted he had seen this happening.”Some of our clients including the ones selling floorboards or moulding machines are doing entrepot trading, involving exports to the US,” he said.Vietnam’s trade ministry has ordered authorities to tighten control over the origin of goods to avoid sanctions by trading partners in the wake of the threatened US tariffs, according to a document seen by AFP on Tuesday.One businessman in Bac Ninh said the surge in investment had once created a worker shortage, but the situation for Vietnamese staff at Chinese companies is now uncertain.Hung, who earns about $270 a month working at a Chinese company producing exterior parts for desktop monitors, said his hours had been cut.”We have stopped getting to work overtime,” said the 30-year-old, who declined to give his full name. “I don’t know how life will be now, as it’s so hard to live here with what I earn.”Wang admitted he was “anxious”.”We originally planned to upgrade some equipment for long-term development, but… because the investment will be quite big, we are a little hesitant now,” he said.