Containers sit stacked at the Uiwang Inland Container Depot in South Korea. (Photographer: SeongJoon Cho/Bloomberg)

South Korea Exports Unexpectedly Dipped in June Amid Trade Woes

(Bloomberg) -- South Korea’s exports slightly contracted in June, adding to concerns about the health of the country’s economy.

Shipments fell 0.1 percent from a year earlier, compared with the 2.2 percent gain forecast in a Bloomberg survey of economists. Imports increased 10.7 percent, leaving a trade surplus of $6.32 billion, according to a statement from the trade ministry on Sunday.

The dip in exports was partly due to a lower number of working days and the base effect from large-scale exports of vessels a year earlier, according to the trade ministry.

The country is one of the first major economies to report trade data, and is considered a bellwether for global demand. Korea’s economic growth has been led by exports this year while domestic demand has been lackluster.

The trade data will be closely watched by analysts seeking cues on the timing of the central bank’s next interest-rate hike from the current 1.5 percent. While the Bank of Korea has indicated that its next move is likely to be a hike, tepid jobs growth and a softening in exports have weighed on the side of caution.

Tariff Threats

Meanwhile, threats of tariffs and counter-tariffs from the U.S. and China threaten to spill over and hurt Korea, which is a key exporter of parts and components for Chinese factories. Korea sends about a quarter of its shipments to China, 78.5 percent of which are intermediary goods. The Korea Trade Promotion Agency estimates that at least 10 percent of these goods end up in products sold in the U.S.

The trade ministry said it submitted a paper to the U.S. government voicing its opposition to tariffs on automobile imports that are being considered by the Trump administration. During meetings with lawmakers and industry officials in the U.S. last week, trade minister Paik Un-gyu said that such tariffs would harm the competitiveness of the U.S. automobile industry, which is dependent on a global supply chain.

Korea’s exports to China rose 29.8 percent in June from a year earlier, while those to the U.S. and Japan increased 7.6 percent and 11.1 percent, respectively, according to the trade ministry. Shipments of semiconductors were up 39 percent, while auto exports fell 9.9 percent.

©2018 Bloomberg L.P.