Korea: Merchandise trade surplus shrinks in October
Latest reading: In October, the trade balance was USD +6.1 billion, following a USD +9.5 billion reading in the prior month, with trade flows disrupted by the Chuseok holiday, which took place from October 3–9. Over the last 12 months, the trade balance totaled USD +68.5 billion.
Exports increased 3.6% in annual terms in October, coming on the back of a 12.6% increase in the previous month, despite market expectations that U.S. tariffs would drag them down. October’s reading marked the fifth consecutive month of export growth, with growth in exports of semiconductors—Korea’s key export good—jumping even higher in October (+25.4% vs +22.1% in September) amid rising demand for artificial intelligence and server applications. Other Korean goods exports, including automobiles, petrochemicals and steel, declined year-on-year due to softer global demand. Looking at key export destinations, shipments to the U.S. fell 16.2% as import tariffs dampened shipments.
Meanwhile, imports were down 1.5% in annual terms in October, following 8.2% growth in the previous month.
Outlook: The outlook for Korea’s external sector has become more certain following the bilateral trade and investment deal reached with the U.S. on 29 October. In particular, tariffs on autos and auto parts have been returned to 15%, while some other items—such as aircraft parts and pharmaceuticals—are expected to benefit from tariff exemptions once the agreement is formalized.