— Bloomberg
SEOUL: South Korea’s exports returned to growth on the back of continuing demand for semiconductors, in a positive sign for policymakers seeking to shore up the trade-reliant economy against any potential headwinds from Donald Trump’s tariff plans.
Exports adjusted for working-day differences rose 3.6% in November from a year earlier, rebounding from a dip in the prior month, data from the Trade Ministry showed yesterday.
Headline exports rose 1.4% while imports decreased 2.4%, resulting in a trade surplus of US$5.6bil.
South Korea is one of the world’s most export-reliant nations and its vulnerability to protectionism has raised concerns among policymakers and business leaders in Seoul after President-elect Trump vowed to increase tariffs on trading partners.
While South Korea may be subjected to universal tariffs of just 10%, it could also sustain indirect damage from larger duties targeting some of its key trading partners.
Trump has pledged 60% duties for China, which is South Korea’s biggest trading partner.
The Bank of Korea (BoK) last Thursday slashed its benchmark interest rate in a surprise back-to-back move aimed at girding the economy for any potential headwinds stemming from Trump’s return to the White House in January.
The central bank has already voiced concerns about a softening in the export growth of technology products.
South Korea is home to two of the world’s biggest memory-chip manufacturers, and its businesses are widely embedded across global technology supply chains.
The United States has been a steady source of demand for South Korea’s semiconductors as artificial intelligence developers beefed up their purchases of cutting-edge devices.
Washington has intensified its controls of chip exports to China, seeking to suppress Beijing from pursuing a level of technology that could threaten US dominance.
Those dynamics have complicated the business equation for South Korean chipmakers such as Samsung Electronics Co that have factories operating in China. Sustained demand for memory chips is a key driver of the nation’s economic momentum, and the government aims to help sustain its growth with billions of US dollars pledged in fiscal support next year.
The South Korean economy could still struggle to grow more than 2% in 2025 and 2026, according to the latest BoK forecasts.
That’s partly owing to the memory-chip industry’s slide past the peak of its most recent boom-and-bust cycle.
Also, private consumption remains lacklustre, with households and companies feeling the pinch from an extended period of elevated interest rates.
A prolonged slump could fuel calls for government stimulus and faster monetary easing by the central bank.
Lower interest rates, in turn, could put more downward pressure on the local currency at a time when the won is among those already suffering from the so-called Trump trades.
“Trump’s return to the White House suggests a tumultuous period lies ahead, with higher US tariffs and fresh US-China trade frictions impairing the smooth flow of goods and the functioning of supply chains,” Dave Chia, an associate economist at Moody’s Analytics, said in a note.
“As a key US and China trading partner, South Korea could be caught in the middle.” — Bloomberg
