South Korea’s stalled export growth in August highlighted the difficulties facing international trade as shipments to the United States fell under President Trump’s tariffs.
According to preliminary data released Monday by the trade ministry, exports from Asia’s fourth-largest economy increased 1.3% year over year to $58.40 billion, significantly less than the revised 5.8% increase in July. The slowdown was less severe than anticipated because economists surveyed by The Wall Street Journal had predicted a 3.7% increase.
South Korea’s export growth slows amid U.S. tariffs
Despite strong demand for computer chips and a trade agreement between the United States and South Korea in late July that reduced some tariffs, the soft data still came in. With imports down 4.0% from the previous year to $51.89 billion, the trade surplus for August was $6.51 billion, down from $6.61 billion in July.
Even though semiconductor exports continued to gain from the artificial intelligence boom, analysts said that the practice of front-loading shipments to avoid tariffs has begun to taper off. Analysts said August’s one fewer working day probably caused the softer year-over-year comparisons.
According to ministry data, exports to China decreased 2.9% and shipments to the United States fell 12% from the previous year. For the sixth consecutive month, semiconductor shipments, which make up around one-fifth of South Korea’s total exports, increased 27% year over year to a monthly record of $15.10 billion. Vehicle and ship exports increased as well, but shipments of petroleum products and petrochemicals decreased due to a global supply glut and declining oil prices.
Slow growth is still growth
South Korea’s total exports have increased so far in 2024 in spite of Trump’s protectionist policies. However, it’s still unclear if that momentum will last. Trump’s proposed blanket tariff was lowered from 25% to 15% in the July trade agreement, which helped to lessen some of the uncertainty. Although South Korean automobiles are now subject to 15% duties, steel and industrial products that contain the alloy are still subject to a high 50% tariff.
The South Korean government cautioned that exports might deteriorate in the second half of the year in its August semiannual outlook. Higher U.S. tariffs are expected to disproportionately affect autos, steel, and petrochemical products, according to officials.
The most recent statistics show that South Korea’s export-driven economy is both resilient and vulnerable. Although robust demand for semiconductors keeps acting as a buffer, declining shipments to China and the United States raise questions about how long the nation can tolerate tensions in international trade.
Featured Image Credit: 준섭 윤; Pexels: Thank you!
