South Korea exports stay resilient as Trump tariff threat looms
SOUTH Korea’s exports maintained growth momentum in January, keeping optimism alive at the start of a year overshadowed by domestic political turmoil and Donald Trump’s tariff threat.
The value of shipments adjusted for working-day differences increased 7.7 per cent from a year earlier, according to data released Saturday by the customs office. That compared with a 4.3 per cent gain initially reported for December.
In headline figures distorted by the Lunar New Year holiday, exports fell 10.3 per cent, less than the 14 per cent contraction surveyed by Bloomberg. Overall imports decreased by 6.4 per cent, resulting in a trade deficit of US$1.9 billion.
South Korea is one of the world’s biggest exporters with technology products at the core of its earnings. Trump’s tariff threats have posed a severe risk for the trade-reliant economy whose shipments have slowed in recent months.
Semiconductors are the biggest driving force behind South Korea’s exports and its producers, like Samsung Electronics, face restrictions on exports to China, as Washington seeks to prevent Beijing from acquiring advanced devices needed to fuel artificial intelligence (AI) development.
On Friday, Samsung’s chip division reported a smaller-than-expected quarterly profit while domestic rival SK Hynix’s shares plunged, in part on concerns that DeepSeek’s low-cost AI would lead to sharp cuts in spending on data centres and state-of-the-art chips.
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South Korean chipmakers also face fresh headwinds stemming from Trump’s return to power. Howard Lutnick, Trump’s commerce secretary nominee, told US senators earlier this week that his administration would review subsidies promised for them under the Biden administration.
Trump, sworn in as president for a second term last month, has also threatened varying levels of tariffs for trading partners. Among his key issues are widening trade deficits the US is recording with export giants, including China and Mexico. South Korea ranks eighth among countries with the largest trade surpluses against the US.
South Korea plans to increase its imports of American energy, should trade imbalances between the two countries emerge as an issue with Washington, Bloomberg News has previously reported. It may also consider raising US food imports.
South Korea has sent a working-level team to Washington to get more specific details of Trump’s trade policy, and is working on action plans to minimise the impact on its businesses. The government also seeks talks with the US president to discuss cooperation.
Concerns over trade come as the economy slows after President Yoon Suk Yeol’s short-lived declaration of martial law battered consumer confidence. Yoon has been arrested on charges of insurrection and a court is reviewing the impeachment motion passed against him.
The South Korean central bank has cut its growth forecast for this year amid concerns over the political turbulence, global trade under Trump and weakening chip exports. The Bank of Korea said last week that gross domestic product only grew 0.1 per cent last quarter from the previous three months.
Seeking to shore up the economy via consumption, the government led by Acting President Choi Sang-mok designated a one-off holiday before the three-day Lunar New Year break in late January. Many workers took additional days off, which contributed to the larger-than-usual distortions in export figures year on year.
The BOK is expected to cut its benchmark interest rate when it convenes later this month, considering the slowing economic momentum. It unexpectedly kept the rate unchanged at 3 per cent last month, following two consecutive cuts in late 2024.
A slowdown in export growth is a top concern for South Korean policymakers. The country’s companies are widely embedded across global supply chains, including automobiles, rechargeable batteries, shipbuilding and refined oil. BLOOMBERG
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