South Korea’s Exports Sputter as Dangers Rise in Chips and Tariffs

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(Bloomberg) — South Korea’s exports misplaced progress momentum in February as demand for semiconductors weakened and officers scrambled to have interaction the US in hopes of averting a success from Donald Trump’s tariff marketing campaign.

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The worth of shipments adjusted for working-day variations decreased 5.9% from a yr earlier, in accordance with information launched Saturday by the customs workplace. That in contrast with a 7.7% rise initially reported for January.

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Regardless of extra working days than final yr, unadjusted exports grew simply 1%, in contrast with a 3.7% growth forecast by economists in a Bloomberg survey. Total imports elevated by 0.2%, leading to a commerce surplus of $4.3 billion.

Semiconductor shipments fell 3% from a yr earlier, marking the primary drop since late 2023, as standard memory-chip costs declined, in accordance with the Commerce Ministry. Semiconductors are South Korea’s largest driver of earnings from overseas.

With an economic system closely reliant on commerce, South Korea is among the many nations most susceptible to protectionist insurance policies. Trump’s plans to escalate tariffs and produce extra manufacturing again to the US pose a threat to a spread of South Korean firms deeply embedded in world provide chains, together with Samsung Electronics Co., and automakers akin to Hyundai Motor Co.

Performing President Choi Sang-mok on Friday spoke with US Treasury Secretary Scott Bessent and requested that Washington keep in mind South Korea’s contributions to the US economic system when it places collectively insurance policies together with reciprocal tariffs which have been flagged by Trump. Individually, Ahn Duk-geun, Minister of Commerce, Business and Power met with Commerce Secretary Howard Lutnick and the 2 agreed to kind working teams to debate the fees and shipbuilding cooperation, his ministry mentioned Saturday in a press release.

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Trump final month signed a measure to look into new levies on a country-by-country foundation, and Lutnick mentioned all research ought to be full by April 1. The US president has additionally ordered 25% tariffs on metal imports and floated the thought of the fees on semiconductors and automakers, key drivers for South Korea’s economic system.

Chey Tae-won, chief of SK Group, which features a memory-chip provider to Nvidia Corp., led a delegation of enterprise executives to the US final month, assembly with policymakers and legislators who may assist South Korean firms higher place themselves earlier than Trump’s commerce insurance policies take impact.

“Exports have stored the economic system from slipping into recession in latest quarters, and the growth in synthetic intelligence ought to maintain shipments of superior reminiscence chips,” Dave Chia, a Moody’s Analytics economist, mentioned. “Nonetheless, a slowdown in different main classes and new tariffs within the US following the latest change in administration stand to restrict export progress.”

The US is South Korea’s foremost ally and gives safety ensures in opposition to North Korea. Its imports from the Asian nation have risen in recent times, making Seoul extra susceptible to tariffs from the US. China, South Korea’s largest buying and selling companion, can also be bracing for rising tensions with the US.

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Commerce dangers have risen at a time when President Yoon Suk Yeol’s short-lived declaration of martial regulation in December has battered shopper confidence. Yoon was later impeached and arrested on prices of rebellion, and a court docket is reviewing whether or not to completely oust him or put him again in workplace.

Prime Minister Han Duck-soo was additionally impeached by an opposition-led parliament, and Finance Minister Choi has since been main the federal government. In that position, Choi has been negotiating the specifics of an additional price range that might assist forestall an extra slowdown in financial momentum. 

South Korea’s essential opposition Democratic Celebration has proposed drafting an additional price range plan price as a lot as 35 trillion gained ($24 billion) because it tries to place itself as the motive force of help measures. In the meantime, Financial institution of Korea Governor Rhee Chang-yong instructed the bundle ought to be price between 15 trillion gained and 20 trillion gained.

The BOK final month minimize its benchmark rate of interest to help the economic system whereas additionally downgrading its financial forecast for this yr to account for issues about commerce dangers, slowing consumption and home political turbulence. The central financial institution made the transfer even because it’s been cautious concerning the threat of placing additional downward stress on the native forex. Asia’s weakest performer final yr, the gained has taken an extra hit from Trump’s protectionist pledges.

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