Korea: Merchandise exports fall in June on base effect and amid trade war fears
In June, merchandise exports fell 0.1% compared to the same month last year, totaling USD 51.2 billion. This represented a contrast to the 13.5% increase in May and the second annual decrease in 2018. The fall in June was primarily due to a base effect and 1.5 fewer working days compared to the same month in 2017. Export categories that observed notable growth in June were semiconductors, petrochemicals, petroleum products, computers and peripheral devices, general machinery, auto parts and textiles. Semiconductor exports, for example, hit a record monthly high of USD 11.2 billion. Merchandise imports, meanwhile, grew 10.7% in June (May: +12.6% year-on-year) due to significantly more purchases of crude oil, computer storage devices and liquified natural gas from abroad, reaching USD 44.9 billion. Crude oil imports climbed 68.2% to reach USD 7.3 billion in June due to higher oil prices.
The merchandise trade surplus slipped to USD 6.3 billion in June from USD 6.7 billion in May (June 2017: USD 10.7 billion). The 12-month trailing surplus amounted to USD 83.9 billion in June compared to USD 88.3 billion in May.
On balance, there is reason to be cautiously optimistic about the external sector for the rest of this year. A thaw in relations between the governments of China and Korea should lead to an uptick in Chinese tourist arrivals in Korea. Furthermore, a growing global economy should support demand for key Korean merchandise exports, particularly semiconductors. However, as the Minister of Trade, Industry and Energy noted on 1 July, downside risks include more restrictive trade policies abroad. For example, although Korea and the U.S. agreed in principle to a revised free trade agreement in March, Korea’s external sector could be hit by growing trade tensions between the U.S. and China. Moreover, an expected decision later this year from the U.S. on whether to unilaterally impose tariffs on automobile imports from around the world could result in pain for Korean exporters if it does not go their way.