South Korea’s Exports Show Growth in January Despite Domestic Political Uncertainty and Donald Trump’s Tariff Threat

South Korea’s Exports Show Growth in January Despite Domestic Political Uncertainty and Donald Trump’s Tariff Threat

South Korea’s exports continued to show growth in January, providing optimism at the start of a year marked by domestic political instability and the looming threat of tariffs from Donald Trump.

According to data released by the customs office on Saturday, adjusted for working-day differences, the value of shipments increased by 7.7% compared to the same month last year. This was an improvement from the 4.3% growth reported for December.

However, when factoring in the Lunar New Year holiday, headline figures revealed a 10.3% drop in exports—better than the 14% decline projected by Bloomberg. Overall imports dropped by 6.4%, leading to a trade deficit of $1.9 billion.

South Korea, one of the world’s largest exporters, primarily generates revenue from technology products. The threat of tariffs from former President Trump has created considerable risk for this trade-dependent economy.

Semiconductors play a crucial role in South Korea’s exports, and major producers like Samsung Electronics are facing restrictions on shipments to China, as the U.S. seeks to prevent Beijing from acquiring advanced technologies for AI development.

In January, South Korea’s chip exports grew by 8.1% year-over-year, according to the Trade Ministry. However, the pace of growth slowed, raising concerns about weakening demand for memory chips.

Despite the positive export data, the chip sector has faced challenges. Samsung’s chip division reported a smaller-than-expected quarterly profit, while SK Hynix’s shares fell, partly due to worries that the rise of low-cost AI technology like DeepSeek could lead to reductions in data center and cutting-edge chip spending.

The return of Trump to the presidency also adds new challenges. His commerce secretary nominee, Howard Lutnick, recently stated that the administration would review subsidies given to foreign chipmakers under the Biden administration.

Trump, who took office for a second term last month, has also threatened tariffs on various trading partners, including South Korea, which ranks eighth among countries with the largest trade surpluses against the U.S. He is also addressing U.S. trade deficits with nations such as China and Mexico.

South Korea is already planning to increase imports of U.S. energy to address potential trade imbalances with Washington, and may consider importing more U.S. food products as well. The government has sent a team to Washington to gather more details on Trump’s trade policy and is working on strategies to minimize the impact on its businesses. Additionally, South Korea is seeking talks with Trump to discuss possible areas of cooperation.

Concerns about trade are compounded by economic slowdown following political turmoil. President Yoon Suk Yeol’s controversial declaration of martial law has hurt consumer confidence. Yoon faces charges of insurrection, and a court is reviewing an impeachment motion against him.

The Bank of Korea (BOK) has revised its growth forecast for the year, citing political uncertainty, Trump’s trade policies, and weakening semiconductor exports. The BOK reported that South Korea’s GDP grew just 0.1% last quarter compared to the previous three months.

To stimulate the economy, the government, led by Acting President Choi Sang-mok, designated a one-off holiday before the Lunar New Year break in January. Many workers took extra days off, leading to greater-than-usual distortions in the export figures.

The BOK is expected to lower its benchmark interest rate when it meets later this month, in an attempt to combat slowing economic growth. It had unexpectedly kept the rate unchanged at 3% last month after two consecutive cuts in late 2024.

South Korea’s exporters, which are integral to global supply chains in sectors like automobiles, rechargeable batteries, shipbuilding, and refined oil, are facing growing concerns about a slowdown. Exports accounted for 90% of the country’s GDP growth last year, according to the Trade Ministry.

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