South Korea's export performance for February 2025 revealed disappointing growth amid global trade tensions, falling short of market expectations.
According to preliminary trade data released on March 1, South Korea's outbound shipments totaled $52.60 billion, reflecting only a 1.0% increase from the previous year. This growth is particularly underwhelming, considering economists had projected an average increase of 3.8% as indicated by a Reuters poll.
The modest uptick follows January's significant downturn, where exports plunged 10.2%, marking the first decline after 16 consecutive months of growth. The recent improvement was attributed largely to timing factors associated with the Lunar New Year holidays. Notably, when adjusted for working days, exports declined by 5.9% compared to the same period the previous year.
South Korea is the first major exporting nation to release monthly trade statistics, which serve as an early indicator of global demand health. The data release is especially pertinent as it marks the first month of trade statistics since U.S. President Donald Trump implemented various tariffs.
Among the key developments, shipments to China, South Korea's largest export market, fell by 1.4%. Conversely, exports to the United States showed slight positive movement, rising by 1.0%. Exports to the European Union, by comparison, experienced more substantial drops, decreasing by 8.1%.
These trends highlight the far-reaching impacts of the trade war instigated by the U.S. tariffs. President Trump announced on Thursday the imposition of additional tariffs—10% on imports from China, which are set to take effect soon. This move is intended to exacerbate the pressure on Chinese exports and prompt countermeasures from Beijing.
South Korea's industry minister, Ahn Duk-geun, sought discussions with U.S. Commerce Secretary Howard Lutnick this week, requesting exemptions from these tariffs. The overarching concern remains how these tariffs will impact trade relations moving forward.
Examining exports by product category, semiconductors—the backbone of South Korea's tech sector—saw exports contract by 3.0% in February, ending 15 months of positive growth due to falling memory chip prices. This decline signals potential challenges moving forward for the tech industry, with memory chips seeing significant pricing declines lately.
On the other hand, there was brighter news for the automobile sector. Automobiles registered growth at 17.8%, marking the highest increase seen over the past 13 months, buoyed by rising sales of hybrid vehicles.
Despite these slight gains, South Korea's total imports increased modestly by 0.2%, totaling $48.30 billion. Consequently, the country recorded a trade surplus of $4.30 billion for the month.
The broader impacts of the trade war have also started affecting other regional economies. For example, U.S. tariffs on imports will soon extend to all goods from Vietnam, amounting to more than $142 billion last year, representing about 30% of Vietnam's gross domestic product.
South Korea's trade data reflects the fragile state of global trade, particularly concerning the interdependencies between major economies and the negative ripple effects of tariff wars initiated by the U.S. The ramifications of the recent American tariffs continue to pose significant challenges, potentially reshaping trade dynamics not just for South Korea but for nations worldwide.
Enduring uncertainties surrounding tariffs, exports, and the general state of global demand may compel South Korea to reevaluate its trade strategy and seek diversification of its economic partnerships to mitigate adverse impacts.