Korea’s trade surplus with the United States, which peaked in 2023, is likely to gradually shrink in the future, according to a new report.
The Korea Institute for Industrial Economics & Trade (KIET) released a report on a structural analysis of the causes of Korea’s surplus in trade with the United States and an outlook on Korea’s trade with the U.S. on March 25. According to the institute, Korea’s trade surplus with the United States has surged since 2021 when the impacts of COVID-19 were resolved. In 2023, the figure reached US$44.5 billion, up 59.5 percent from US$27.9 billion in 2022, making the U.S. Korea’s largest trade partner in 21 years.
“Since the pandemic, a lot of money has been released in the United States, giving people more money to spend, so South Korea’s exports to the United States have soared,” said Byun Chang-wook, a senior research fellow at KIET. A drop in Korea’s imports from the United States after the pandemic was largely due to lower oil prices and rising U.S. inflation.
However, KIET predicts that Korea’s trade surplus with the United States peaked in 2023 and is likely to gradually shrink beginning from 2024. This is because while imports from the United States are expected to inflate due to falling U.S. prices and rising international oil prices, the growth of Korea’s exports to the United States is expected to weaken due to an economic slowdown in the United States.
The report also warned that the upcoming U.S. presidential election in November may become a factor, too. “Presidential candidate Trump is proposing to strengthen trade barriers such as universal tariffs to lower America’s trade deficit that threatens his country’s economy and security,” the report said. “His major campaign promises in the trade sector are in conflict with factors contributing to Korea’s trade surplus with the United States so many variables may come into play in determining the trade balance between the two economies.”
“If Trump is elected, America’s pressure on Korea’s trade surplus with the United States will intensify, so it is necessary for the Korean government and exporters to prepare countermeasures,” the KIET said, noting that the Trump administration has designated Korea as a currency manipulator based on the size of its trade surplus, which led to concerns about various trade sanctions from the U.S. government in the past.