South Korean Exports Slide for Seventh Month on Trade War Woes

(Bloomberg) --

South Korean exports took another hit in June, highlighting ongoing weakness in tech demand and the economy’s acute sensitivity to international trade tensions.

Exports dropped 13.5% in June from a year earlier, falling for a seventh straight month, data from the Korea Customs Service and trade ministry showed Monday. The fall was largely in line with economists’ estimates.

The June data offers the first full-month trade figures since the U.S.-China trade war escalated in May. While the restarting of talks announced at the weekend during the Group of 20 summit in Japan offers hope of an eventual deal between the world’s two largest economies, analysts warned that the future still looks highly uncertain for Korea’s exporters.

Key Insights

• South Korea’s reliance on the U.S. and China as its two biggest export markets makes it vulnerable to the ongoing trade war. About a quarter of Korean exports go to China, with many of them used to produce final goods that are shipped on to other countries including the U.S.
• Korea releases its export data earlier than most other major economies. Given its importance in the global supply chain for electronics -- from semiconductors to smartphones -- the figures suggest no let up in the slowdown in global trade and demand for tech items. Chip exports continued to plunge from a year earlier.
• Calculating the impact of the trade dispute on Korea isn’t simple since its exporters could also benefit as the two sparring countries look for alternative import sources.
• Bank of Korea deputy governor Yoon Myun-shik told reporters Monday that the U.S.-China truce was positive for sentiment and that South Korea’s semiconductor industry was likely to rebound.
• “The agreement at the G-20 was only a truce and there’s still the persisting question of whether demand is recovering fundamentally,” said Kim Doo-un, an economist at KB Securities Co. Relations between the two sides will continue to be shaky and the agreement to keep talking will only have a limited effect on exports, he added.

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• Imports declined 11.1% in June from a year earlier, leaving a trade surplus of $4.17 billion
• Exports to China dropped 24.1% while those to the U.S. fell 2.5%
• Semiconductor shipments slid 25.5%; petrochemicals slumped 24.5%.
• Automobile shipments increased 8.1% while exports of ships rose 46.4%.

--With assistance from Myungshin Cho and Michelle Seoh.

To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Paul Jackson, Michael Heath

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