Seoul, South Korea – The Korea Chamber of Commerce and Industry (KCCI) announced on June 29 that its Business Survey Index (BSI) for the third quarter of 2025 (July-September) reveals a stark contrast in business sentiment among South Korean manufacturing sectors, largely influenced by reciprocal tariff impacts. The survey, which polled 2,186 manufacturers nationwide, shows an overall BSI of 81 for Q3, a 2-point increase from Q2 (April-June), yet marking the 16th consecutive quarter below the benchmark of 100. A BSI below 100 signifies that more companies anticipate a deterioration in business conditions compared to the previous quarter.

The industry-specific BSI figures highlight the varied effects of tariff policies and export performance. Optimistic outlooks prevail in sectors exempt from US tariffs. The semiconductor industry recorded a BSI of 109, a significant 22-point jump from Q2, surpassing the 100-point benchmark for the first time in a year. This positive shift is largely attributed to surging exports driven by a global increase in demand for high-value-added semiconductors, fueled by the expansion of artificial intelligence (AI) technologies. Similarly, the pharmaceutical sector also posted a positive BSI of 109.

The cosmetics industry, despite facing some tariff impacts, demonstrated resilience with a BSI of 113. This positive forecast is a result of successful market diversification strategies, with increased exports to regions such as Europe and the Middle East.

Conversely, industries directly subject to US tariffs are experiencing a more pessimistic outlook. The steel industry registered a BSI of 67, remaining significantly below the benchmark. This downturn is attributed to reduced exports to the United States and heightened competition from an influx of Chinese and Japanese steel products into the domestic market. The automotive sector also faces a predominantly negative outlook, with a BSI of 76, citing decreased exports to the US due to tariff burdens. The refining and petrochemical industries are struggling with a BSI of 72, grappling with structural industry stagnation compounded by increasing oil price volatility.

From a broader perspective, both export (87) and domestic demand (79) outlooks remain subdued. Domestic demand, in particular, appears more challenging due to a prolonged construction slump and weakened consumer spending. The survey also indicates a disparity in confidence based on company size, with large corporations (89) showing a slightly better outlook than mid-sized (77) and small (81) enterprises. Geographically, all regions except Jeju (100) anticipate a gloomier Q3 compared to the preceding quarter.

Furthermore, the KCCI survey revealed that 54.1% of manufacturing companies expect to fall short of their sales targets for the first half of 2025 (January-June). Companies identified sluggish domestic demand (64.7%) as the primary internal factor affecting their performance, followed by rising raw material prices (30.9%), subdued overseas demand (23.8%), exchange rate fluctuations (19.3%), and tariff measures (18.0%).

The KCCI emphasized the persistent burden on businesses, as evidenced by the tangible decrease in exports to the US due to tariffs. The organization underscored the necessity for proactive measures, including easing trade uncertainties, regulatory improvements, and robust investment incentives, to stimulate domestic demand and revitalize business sentiment.