South Korea's Export Growth Falters Amid U.S. Trade Policy Jitters and Sectoral Shifts
1min read South Korea's exports have grown for the 14th consecutive month, yet the pace has slowed to its lowest in over a year, reflecting declining demand from the United States. This trend surfaces amid mounting concerns among policymakers about the vulnerability of South Korea's export-driven economy to potential U.S. tariff changes. Though the semiconductor sector continues to thrive, the slower overall growth poses challenges in maintaining economic momentum.
The latest data from Seoul indicates a 3.6% increase in exports in November compared to the same period last year, rebounding from the previous month's dip. However, this rebound is modest as overall export growth hovers at a meager 1.4%, with imports decreasing by 2.4%, resulting in a trade surplus of $5.6 billion.
While South Korea boasts some of the world’s largest memory chip manufacturers, intertwined deeply with global tech supply chains, recent export figures suggest a deceleration in tech product shipments, eliciting concerns from the Bank of Korea. This scenario unfolds as South Korea braces for potential shifts in U.S. trade policies that could instigate further volatility.
Despite the robust performance of high-end semiconductor exports, growing by 30.8% to $12.5 billion in November, other sectors show troubling signs. Auto exports plummeted by 13.6%, the steepest drop since June 2020, affected by parts supplier strikes and poor weather conditions delaying shipments.
Looking ahead, the Korea Institute for Industrial Economics & Trade forecasts a 2.2% year-on-year increase in exports for 2025, a marked slowdown from the previously anticipated 8.4% growth in 2024. The report underscores persistent risks from U.S. trade policy adaptations that could hinder automotive exports and, consequently, South Korea's overall export growth.
Additionally, the demand shift in major export markets and the rise of offshore production are predicted to shrink automotive component exports by 2.7%. Yet, the semiconductor sector is poised for an 8.5% growth in exports, bolstered by recovering global prices and increasing demand for IT products. Conversely, battery exports are expected to decline by 6.7% year-on-year in 2025, partly due to a slowdown in global electric vehicle demand.