South Korea's exports collapsed due to impact of the

Source: Wall Street Insights

South Korea's trade data in April for the first time exposed the substantial impact of Trump's radical protectionist policies on export-oriented economies.

Data released by the Korea Customs Service on Monday showed that in the first 20 days of April (after adjustment for working days), South Korea's outbound exports declined by 5.2% year-on-year, which is in sharp contrast to the 5.5% growth in March. This data reflects the risk of potential disruption to the global supply chain triggered by the US trade protectionist policies. South Korea, as a "canary," has sounded the alarm for global export-oriented economies about the possible challenges they may face.

Looking at the data by country, in the first 20 days of April, South Korea's exports to the United States and China declined by 14.3% and 3.4% respectively, while exports to the European Union increased by 13.8%. In terms of product categories, during the same period, South Korea's automobile exports decreased by 6.5% year-on-year, semiconductor exports increased by 10.7%, steel exports dropped by 8.7%, and oil product sales plummeted by 22%.

The Tariff Storm Triggers a Global Chain Reaction

According to comprehensive reports from CCTV, after raising metal import tariffs in March, Trump imposed a 25% tariff on automobile imports and a 10% tariff on all other imported goods earlier this month. Trump's trade protectionist policies pose risks to export-driven economies like South Korea.

Min Joo Kang, an economist at ING, said in a report:

Today's data shows that US tariffs are disrupting the global trade dynamics. Due to the exemption of semiconductor tariffs so far, we believe that the demand for high-end chips remains strong. However, due to supply chain disruptions and heightened trade tensions, the traditional chip market is likely to weaken.

Hyosung Kwon, an economist at Bloomberg, pointed out:

In addition to the direct impact of tariffs, the slowdown in the US economy, which has led to a weakened demand for South Korean products, will also cause harm. When trading partners bear the impact of their respective tariffs, the indirect spillover effects generated through the global supply chain may also drag down exports.

South Korean officials said that they are seeking to reach a "major" trade agreement with the United States. According to the Global Times, US Treasury Secretary Steven Mnuchin said on April 14th that the US side will launch tariff negotiations with the South Korean side this week.

Key Industries Face Severe Threats, and the Bank of Korea is Wary of the Economic Outlook

As the sixth largest trading partner of the United States, South Korea's trade surplus with the United States increased by approximately 25% compared to the previous year in 2024, reaching about $55.7 billion. Automobiles and auto parts are one of South Korea's largest export items to the United States.

Therefore, automobile tariffs pose a serious threat to South Korean automakers. According to government data, the United States accounted for nearly half of South Korea's $70.8 billion in automobile exports in 2024.

If the Trump administration decides to proceed with the plan to impose tariffs on semiconductor imports, it may further damage the semiconductor industry, which is a pillar of South Korea's export-oriented economy.

The Bank of Korea decided last week to keep the benchmark interest rate unchanged at 2.75%, while pointing out that due to trade policies, the downside risks to economic growth have significantly increased. Bank of Korea Governor Rhee Chang-yong said at a press conference after the decision:

The overall export momentum is weak. Due to the deterioration of trade conditions, growth slowed down in April, while there was a slight expansion in March.

The central bank said that due to the impact of US trade policies and domestic political uncertainties, growth has been weaker than expected and warned that the economy may experience negative growth in the first quarter.

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