Despite the tariff pressure from the United States, Korean exports are performing well, particularly in semiconductors and ships, leading to expectations of continued strong export trends. This is due to the dramatic resolution of negotiations just a day before the imposition of reciprocal tariffs, alleviating some of the uncertainties that had been pressuring exports.
Korea has secured a promise of most-favored-nation treatment for semiconductors in negotiations with the United States and has decided to embark on a $150 billion shipbuilding cooperation project. However, the export conditions for some items remain difficult, as the automobile sector has lost its duty-free benefits, and a 50% tariff on steel is expected to remain unchanged.
According to the 'July export-import trends' announced by the Ministry of Trade, Industry and Energy on the 1st, the export amount for July was $60.82 billion, a 5.9% increase compared to the same month last year. Following June's $59.8 billion, this marks the second consecutive month of record performance for the same month in history. Considering the application of tariffs on items like automobiles and steel, this is evaluated as a good achievement.
The biggest contributor to the export performance was semiconductors. The semiconductor export in July reached $14.71 billion (+31.6%), setting a record for the same month and continuing an upward trend for five consecutive months. The increase in exports to the United States in July was also attributed to the strong performance of semiconductors, despite declines in other items like steel and automobiles. A Ministry official noted, 'The upward trend in fixed prices continued, driven by memory, and there is sustained strong demand for high-value products like high-bandwidth memory (HBM) and double data rate (DDR) 5.'
Ship exports ($2.24 billion) doubled compared to the same month last year. The export volume of high-value ships, such as tankers and liquefied natural gas (LNG) carriers, has expanded, showing an upward trend for five consecutive months.
Automobile exports subject to U.S. tariffs also continued a positive trend at $5.83 billion (+8.8%) for two consecutive months. While exports to the U.S., the core market, were sluggish due to tariff impacts, strong performances in major markets such as the European Union (EU), Commonwealth of Independent States (CIS), and Latin America helped. Exports of hybrid vehicles (+20.3%) and internal combustion vehicles (+7.3%) in particular have increased.
The July figures also reflected some effects of corporations 'pushing out export volumes' ahead of the announcement of reciprocal tariffs on August 1. However, the government expects that the positive export trends will continue, noting that the trade conditions have significantly improved following the upcoming Korea-U.S. tariff negotiations.
Seo Ga-ram, Director General of the Ministry of Trade, Industry and Energy, said, 'The demand for semiconductors is much more solid than just pushing out, and I believe they will continue to play a role in driving Korean exports,' adding, 'This negotiation has largely removed uncertainties and improved export conditions.'
The United States has previously indicated plans to impose tariffs on semiconductors, but following the resolution of negotiations on July 31, it stated that, '(The tariffs on semiconductor items for Korea) will not be less favorable than those for other countries.' Furthermore, by deciding to allocate $150 billion of Korea's investment cooperation fund specifically to the shipbuilding sector, expectations have grown that ship exports will also improve.
However, the reaction from the automobile industry to the negotiation results has been lukewarm. This is because automobiles will lose the duty-free benefits that have been in place since the Korea-U.S. Free Trade Agreement (FTA) came into effect in March 2012.
Korea had high price competitiveness compared to Japan and the European Union (EU), which were subject to a basic tariff of 2.5%. However, with the application of a 15% tariff in this negotiation, Korea has lost that price competitiveness.
Furthermore, the maintenance of the 50% tariff on steel and aluminum is expected to continue the poor performance of steel exports. Steel exports have recorded negative figures in all months this year, except for April (+5.1%).
Director General Seo noted, 'Compared to last year, there are points of disappointment in the automobile tariff negotiations, as we have lost 2.5 percentage points of price competitiveness,' but added, 'However, I believe that Korea's automobile competitiveness is not absolutely disadvantaged under the same conditions.'
To further alleviate uncertainties, the government has pledged to support increasing exports to third markets. In July, notable exports were observed in CIS ($1.22 billion, +21.5%), Latin America ($2.68 billion, +4.4%), India ($1.79 billion, +10.7%), and Taiwan ($4.66 billion, +68.0%), in addition to the EU ($6.03 billion, +8.7%) and ASEAN ($10.91 billion, +10.1%).
A government official stated, 'We are devising measures with a focus on diversifying export items and regions.'