South Korea Faces Greater Export Pain as Trade Tensions Escalate

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South Korean exports are set for another drop in May, and to go from bad to worse if the U.S.-China trade war doesn’t cool down soon.

Exports during the first 20 days of the month fell 11.7 percent from a year earlier, pointing to a likely sixth-straight full-month drop, driven by tumbling prices of semiconductors and falling exports to China, the country’s biggest export market.

Semiconductor shipments, which account for about a fifth of South Korea’s exports, fell 33 percent, while total exports to China dropped 16 percent.

The recent slide in the South Korean won, which ranks as Asia’s worst performing currency over the past three months, will do little to help given the negative macro factors, which include a downturn in demand and prices for semiconductors. The currency has dropped 5.6 percent over three months.

The escalating trade war between the world’s two largest economies is having a greater impact. Finance Minister Hong Nam-ki said Monday that it could deliver an even bigger blow to the Korean economy than seen already.

"The country most affected by the U.S.-China trade dispute is neither U.S. nor China, it’s Korea," said Park Sang-hyun, economist for HI Investment & Securities in Seoul. "If the trade talks don’t come to agreement at the G-20 in late June, it’s tough to predict that Korean exports will shift to positive territory in the second half."

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

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

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