Semiconductors set a record to save the day! South Korea's exports rebounded by 4.3% in June, but economic concerns remain under the countdown of tariffs

According to the Zhitong Finance APP, data released by South Korea's customs on Tuesday showed that driven by record semiconductor sales, South Korea's exports rebounded by 4.3% year-on-year in June, providing a temporary boost to this trade-dependent economy. Companies accelerated shipments before the broad imposition of tariffs on goods exported to the U.S., driving the rebound in exports.

Economists had previously expected a 5.1% increase in exports in a Bloomberg survey. The average daily export value, adjusted for working days, increased by 6.8% year-on-year. Data from the Ministry of Trade showed that overall imports grew by 3.3%, resulting in a trade surplus of $9.1 billion.

Another report from the Ministry of Trade indicated that although exports to the U.S. fell slightly by 0.5% and exports to China declined by 2.7%, semiconductor shipments surged by 11.6% year-on-year to a record high of $14.97 billion. Chips and automobiles are the biggest drivers of South Korea's exports.

Bloomberg economist Hyosung Kwon pointed out: "The rebound in June exports indicates that external demand has proven more resilient than expected, driven by the global AI boom and exporters' strategic market diversification in response to U.S. tariff pressures. This resilience may help South Korea's GDP rebound from the contraction in the first quarter."

As the data was released, South Korea is fully addressing the potential impacts of protectionist trade policies. Like other countries, South Korea faces industry tariffs on automobile and steel exports to the U.S. Unless an agreement is reached, comprehensive tariffs on other goods will rise from 10% to 25% starting July 9. In June, automobile exports increased by 2.3% year-on-year.

A senior South Korean trade official stated on Monday that it is unrealistic to expect negotiations to be completed by the deadline, so Seoul's goal is to seek an extension while continuing to pursue tariff exemptions. Donald Trump hinted over the weekend that he does not intend to extend the negotiation deadlines with any trading partners: "I don't think an extension is necessary," he said in a Fox News interview recorded on Friday, adding, "Of course, it can be extended, it's no big deal."

South Korean Trade Minister Yeo Han-koo met with U.S. officials last week in an attempt to restart stalled negotiations. The diplomatic talks had been stagnant for months due to a leadership vacuum caused by the impeachment of former President Yoon Suk-yeol. Although newly elected President Lee Jae-myung has promised to prioritize trade stability, progress has been slow. A planned meeting with Trump during the recent G7 summit was suddenly canceled when Trump cut his trip short.

As the economy shrinks and downside risks increase, the Lee Jae-myung government faces mounting pressure. South Korea's GDP contracted in the first quarter, and the central bank significantly lowered its growth forecast for 2025 from 1.5% to 0.8%. With exports accounting for more than 40% of GDP, the impending tariff impacts could further threaten the economy.

The South Korean government had previously announced a supplementary budget of 30.5 trillion won ($22.2 billion) to boost growth and mitigate trade risks. The economy that Lee Jae-myung has taken over faces not only weak demand pressures but also exacerbated challenges due to months of political turmoil