Korea's 2024 Trade Surplus with U.S. Hits Record 55.6 Billion, 25% Increase

The Korea International Trade Association (KITA), the largest export association in Korea, has projected that the country's trade surplus with the United States is expected to gradually decrease. This forecast is based on the continued long-term investments by the U.S. in Korea, which are anticipated to balance the trade dynamics between the two nations. According to government data, Korea's trade surplus with the U.S. reached a record high of 55.6 billion dollars in 2024, marking a 25% increase year-over-year. This significant surplus has been a focal point in recent trade negotiations, with the U.S. announcing retaliatory tariffs on Korean goods. The key issue in these discussions is the reduction of the trade imbalance, highlighting the strategic importance of this economic relationship.

The association's report underscores the potential for a more balanced trade environment as U.S. investments in Korea continue to grow, potentially leading to a more equitable distribution of economic benefits between the two countries. KITA emphasized that the widening trade surplus is not due to unfair trade practices. Over the past three years, Korea's trade surplus has increased by 36.9 billion dollars, with 27.7 billion dollars of this increase attributed to the U.S. seeking alternative supply chains to China, increased U.S. demand, and structural changes in U.S. imports. This indicates that a significant portion of the trade surplus is a result of the deepening trade ties between the U.S. and Korea.

Data from the Korea Trade-Investment Promotion Agency shows that 46.8% of the goods imported by the U.S. from Korea in 2023 were intermediate products required for U.S. direct investments in Korea. This highlights that part of the trade surplus is due to the strengthening of the trade relationship between the two countries. Additionally, automobiles have been one of the fastest-growing export products from Korea to the U.S. in recent years. However, the Trump administration's imposition of a 25% tariff on all imported automobiles and parts poses a significant threat to Korea's exports. The Bank of Korea has warned that the implementation of these tariffs in July could lead to a decline in Korea's exports of automobiles, steel, and semiconductors to the U.S. The impact on automobile exports is expected to be the most severe, potentially reducing Korea's overall exports by 0.6% and its exports to the U.S. by 4%.

Steel products are expected to face a delayed impact, with effects becoming apparent in the third quarter, potentially reducing Korea's overall exports by 0.3% and its exports to the U.S. by 1.4%. Furthermore, if the U.S. imposes a 10% tariff on semiconductors, it could result in a 0.2% decrease in Korea's overall exports. KITA's 2024 annual trade report highlighted that automobiles, machinery, and semiconductors were the top three export categories to the U.S. in 2024, with the rapid growth in semiconductor exports driven by the expansion of data centers by U.S. technology companies. This analysis provides a comprehensive view of the evolving trade dynamics between Korea and the U.S., emphasizing the need for continued dialogue and cooperation to address the trade imbalance and foster a more balanced economic relationship.