South Korea's exports in November showed robust performance, providing a vital boost to its trade-dependent economy. However, the trade protectionism policies of U.S. President-elect Trump cast a shadow over this growth. According to data released by the Korea Customs Service on Thursday, goods exports for the first 20 days of November increased by 5.8% year-on-year, significantly better than the preliminary report of a 0.2% decline in October. Meanwhile, imports edged down by 1%, resulting in a trade surplus of $798 million.
Recovery in Chip and Ship Exports Drives Growth
The data indicates that the chip and ship industries stood out in November's export performance, effectively alleviating the pressure of slowing export growth. Analysts noted that the improvement in trade data this month was not influenced by differences in the number of working days, suggesting a certain level of sustainability in South Korea's export growth.
Trump's Policies Could Impact Korean Exports
Despite the positive signal from export growth, Trump's policy propositions might present potential obstacles for South Korea's trade. During his campaign, Trump promised to increase tariffs, particularly imposing higher rates on exports from China, South Korea's largest trading partner. Moreover, he plans to withdraw subsidies for Korean companies with plants in the U.S. If these policies are implemented, South Korea's exports to the U.S. could drop significantly. Economists predict that by 2028, Korean exports to the U.S. might decline by as much as 55%.
Trade tensions could force Korean companies to adjust supply chain routes, increasing operational costs and further weakening export competitiveness. Economists at Morgan Stanley noted in a report that supply chain restructuring would exert more economic pressure on trade-oriented economies like South Korea, potentially slowing investment and capital expenditure cycles.
Policy Responses and Economic Outlook
In response to trade uncertainties, the Bank of Korea might adopt rate cuts to support economic growth. A research report predicts that by early 2026, the Bank of Korea might lower the benchmark rate five times. Additionally, the head of the IMF's Korea delegation warned that the Korean economy faces high levels of uncertainty, with significant downside risks to growth prospects.
As one of the top 10 countries with the largest trade surplus with the U.S., South Korea might become a prime target for the Trump administration. Policymakers are concerned that escalating trade tensions could dampen South Korea's export growth momentum, forcing companies to invest more in adjusting supply chains, thereby increasing economic pressure.
Challenges Behind the Recovery
Although the November export data brings hope to South Korea's economy, uncertainty in the external environment may still constrain its growth prospects. The protectionist policies of the Trump administration and the challenges from supply chain restructuring may impose greater downward pressure on the South Korean economy. In the future, South Korea will need to maintain export growth while addressing the multiple challenges brought by changing international trade policies.
