US Claims Title as Largest Export Market
South Korea recorded a trade deficit of US$9.97 billion last year, marking the second consecutive year of deficit since 2022. However, the trade deficit in the past year contracted compared to 2022 when it was US$47.78 billion, primarily due to the recovery in exports in the latter half of the year.
What deserves attention is how, with the rapid restructuring of global supply chains last year, the landscape of South Korea’s exports underwent significant changes. Notably, the United States surpassed China, emerging as South Korea’s largest export destination from November onwards. This signifies the first time since 2003, a period of over 20 years. Moreover, after 21 years, the United States became South Korea’s largest trade surplus country. On the other hand, the overall trade balance with China, calculated as exports minus imports, recorded a deficit for the first time in 31 years since the establishment of diplomatic relations in 1992. Last year’s annual exports decreased by 7.4 percent compared to the previous year, representing the first decline in three years. The outlook for this year suggests exports will be led by key sectors such as semiconductors, along with automobiles and ships, which are the mainstay products of South Korea.
According to the “December and Annual Trends in Exports and Imports for 2023” report released by the Ministry of Trade, Industry, and Energy (MOTIE) on Jan. 1, exports in December last year increased by 5.1 percent compared to the same month the previous year, showing three consecutive months of positive growth. Semiconductors, a key export, registered a 21.8 percent increase compared to the same month the previous year, experiencing growth for two consecutive months. Similarly, the automotive sector exhibited double-digit growth at 17.9 percent. In contrast, imports in December of the past year decreased by 10.8 percent. The trade surplus stood at US$4.48 billion, maintaining a surplus for seven consecutive months since June of the previous year.
The export of semiconductors reversed its downward trend from November of last year. It has seen consecutive growth for two months, attributed to the effects of reduction in memory semiconductor production and improved demand for high value-added products. The rebound has demonstrated a high level of resilience. Following a substantial increase in November with 12.9 percent, the growth continued in December with 21.8 percent. However, the annual semiconductor exports for the past year still experienced a decline of 23.7 percent.
The automotive sector single-handedly led the lackluster export performance throughout the year. The annual export revenue for automobiles grew by a whopping 31.1 percent compared to the record high set the previous year. General machinery saw a 4.6 percent increase, and ships experienced a growth of 20.9 percent. Out of the 15 major export items, however, the remaining 12 products all witnessed a year-on-year decline in exports.
Last year’s annual export value amounted to US$632.69 billion, representing a 7.4 percent decrease compared to the previous year. This marks a significant decline again, the first in three years since the impact of the COVID-19 pandemic hit in 2020. The export performance in the past year showed a gradual decline in the first half and a gradual growth in the latter half. In the first half, exports faced challenges, except for automobiles, due to factors such as the semiconductor slowdown and China's slow economic recovery. Starting from the fourth quarter of last year, there was a recovery trend in exports, driven by the rebound in semiconductor exports and the base effect compared to the negative growth of the previous year. Exports shifted to a positive trajectory since October of last year, maintaining three consecutive months of growth.
Last year’s annual import value amounted to US$642.67 billion, marking a significant 12.1 percent decrease compared to the previous year. The reduction in imports was much more substantial than that in exports. As a result, the trade balance showed a surplus in a recessionary trend for the seventh consecutive month since June of last year. Although the annual trade balance for the past year resulted in a deficit of US$9.97 billion, the size of the deficit significantly reduced compared to 2022 when the deficit was US$47.78 billion.
In particular, the export to the United States in December last year recorded US$11.3 billion, securing its position as the top country in terms of monthly export volume. This signified the first time in 20 years and 6 months that the United States surpassed China, emerging as the largest exporting country. In the same month, the export to China recorded US$10.9 billion. An official from the MOTIE said, “Even looking at the annual export figures alone, the United States returned to being the second-largest exporting country after China in 18 years since 2005. The disparity in export proportions between China and the United States has also decreased.” In fact, the difference in export proportions between China and the United States, which was 11.4 percentage points in 2020, narrowed to 1.4 percentage points last year.
Indeed, South Korea’s exports to China dropped by 19.9 percent last year, impacted by China’s sluggish economic recovery, a decline in intermediary goods exports, and the shift away from dependency on China. The deficit in the overall trade balance with China is the first since the establishment of diplomatic relations in 1992, covering a span of 31 years. However, the export decline rate to China, which had reached double digits until the third quarter of last year, improved to single digits after the fourth quarter. Consequently, the export proportions of China in the past year were 19.7 percent, and those of the United States were 18.3 percent, showing a significant narrowing. South Korea’s exports to the United States reclaimed the position of the second-largest export market, driven by a robust performance in exports of electric vehicles and secondary batteries. This marks the first time since 2005, spanning a period of 19 years.