In the first 20 days of April, South Korea’s exports to the United States plunged 14.3% from a year earlier. The sharp drop reflects the Trump administration’s blanket 10% tariff on all imports, alongside a 25% tariff on steel and automobiles. The damage could deepen depending on the outcome of pending decisions on semiconductor tariffs and country-specific reciprocal duties, currently under a 90-day grace period. The U.S.-led tariff shock is now striking the Korean economy in full force.
Among major export items, only semiconductors, which were temporarily exempt, showed growth, rising 10.7%. Most other sectors suffered steep losses, with home appliances plunging 30%, computers 23%, petroleum products 22%, steel 8.7%, automobiles 6.5%, and precision instruments 5.9%. Exports to China, South Korea’s other key trading partner, also slipped 3.4%, further deepening the blow.
Last year, exports accounted for 95% of South Korea’s economic growth. It would not be an overstatement to say the economy is running on a single engine. A trade war involving the U.S. and China, which together make up 40% of Korea’s exports, poses a serious threat to overall economic stability. The Trump administration has also labeled South Korea a “money machine” and is pressing for broader burdens, including a reduced trade surplus, investment in Alaska’s LNG development, and increased defense cost sharing. The Bank of Korea governor recently warned of potential negative growth in the first quarter, saying the country “feels like it has suddenly entered a dark tunnel.”
Despite the grim outlook, South Korea must find the best response under the circumstances. In the upcoming “2+2” trade talks with the U.S. set to begin on April 24, the government must pursue the best possible outcome. It should also take note of Japan’s stance of not rushing into a deal. Given the current absence of a president, postponing any agreement until the next administration takes office may be a wiser approach.
Companies should prepare for a prolonged tariff conflict by expanding exports to other markets, including Europe, the Middle East, Latin America, Southeast Asia, and India. At the same time, industries less affected by tariffs but with strong export potential, such as defense, nuclear power, and shipbuilding, should be further developed through coordinated efforts between the public and private sectors. The government and the BOK must also take more active steps to boost domestic demand to offset the decline in exports.
