South Korea’s early exports show resilience despite Iran turmoil

[SEOUL] South Korea’s export growth maintained momentum in early March, signalling resilient demand even as surging energy prices and renewed trade uncertainty cloud the outlook for global demand.

Exports adjusted for working-day differences climbed 40.4 per cent from a year earlier in the first 20 days of March, customs office data released on Monday (Mar 23) showed. That compares with a revised 28.7 per cent increase for the full month of February.

On an unadjusted basis, shipments rose 50.4 per cent, while imports gained 19.7 per cent, resulting in a trade surplus of US$12.1 billion.

Semiconductors continued to drive South Korea’s overall shipments, supported by sustained investment in artificial intelligence (AI) and data centres. Other sectors, including autos, oil products and steel, also posted gains. Chip exports surged nearly 164 per cent, while autos rose 11 per cent and oil products 49 per cent.

At the same time, risks to the outlook are growing. A surge in global crude oil prices linked to the Iran conflict is raising raw materials costs, while worsening shipping conditions and broader supply disruptions are adding pressure on trade flows. The impact is particularly acute for South Korea, which depends heavily on imports of energy and commodities.

Before the Iran war began in February, the Bank of Korea (BOK) said that exports were likely to maintain an upward trajectory, supported by robust semiconductor demand, while policymakers monitored risks from currency volatility, housing prices and geopolitical tensions.

Now, the impact from higher oil prices will incentivise the central bank to “act more hawkish”, Citigroup economist Jin-Wook Kim wrote in a note last week. He said that the BOK will deliver 25 basis-point hikes in July and October, bringing the rate towards 3 per cent.

The report comes after BOK board member Lee Soohyung said that the bank’s outlook should change from its projections in February, as it faces upside risks to inflation, while growth is subject to downward pressures. The BOK is set to get a new leader after governor Rhee Chang Yong’s term ends next month.

Earlier this month, South Korea’s parliament approved a special bill required to implement a pledge to invest US$350 billion in the US. The new legislation allowed the establishment of a new state-run vehicle to oversee investment projects tied to last year’s trade agreement with Washington.

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Trade uncertainty remains elevated after the Supreme Court struck down tariffs imposed under US President Donald Trump’s emergency powers, prompting him to pursue alternative measures to maintain a universal tariff rate of 15 per cent and probe into Section 301 of the Trade Act to impose tariffs on countries it deems to be engaging in unfair trade practices.

Regarding the probe into countries with large trade surpluses with the US, Finance Minister Koo Yun Cheol said that he expected current tariff arrangements with the US to remain largely unchanged. He added that the government would continue talks with US officials over potential Section 301 measures while making its case to avoid unfavourable revisions.

By destination, exports to China climbed 69 per cent, while shipments to the US also increased 57.8 per cent. Exports to the European Union and Taiwan rose 6.6 per cent and 80 per cent respectively. BLOOMBERG