South Korea’s export data for May, released by the Ministry of Trade, Industry and Energy on June 1, reflects deepening concerns over the country’s economic trajectory. Exports, once a reliable pillar of support amid sluggish domestic demand, are now showing signs of faltering. Semiconductor exports—the nation’s top-performing item—surged to a record high, buoyed by growing demand for artificial intelligence (AI) technology. Yet overall exports slipped into negative territory, underscoring broader structural challenges. These include weakening demand in key sectors such as electric vehicles (EVs), as well as intensifying tariff pressure from the United States.
Of South Korea’s 15 major export categories, 10 posted year-on-year declines, including 7 of the top 10 by value. Shipments to the country’s three largest trading partners—the United States, China, and the Association of Southeast Asian Nations (ASEAN)—also contracted. While exports to the European Union, the fourth-largest market, edged up, the modest gain was largely attributed to a base effect stemming from poor performance a year earlier.
Semiconductor exports rose 21.2% year-on-year to $13.79 billion in May, the second-highest monthly total on record. The increase was driven by sustained demand for high-bandwidth memory (HBM) chips used in AI data centers, alongside a significant uptick in shipments to so-called “intermediate manufacturing hubs” such as Taiwan and Vietnam.
Still, the broader export landscape remained weak. Since March, tariffs introduced under former U.S. President Donald Trump have begun to weigh heavily on key sectors. Exports of steel fell 12.4%, while automobile shipments dropped 4.4%, and auto parts declined 9.4%. A sharp drop in global oil prices—now at their lowest levels in four years—also dragged down exports of petroleum products by 20.9% and petrochemicals by 20.8%. General machinery, which had previously benefited from strong overseas investment by domestic firms, slipped 5.3%.
Exports to all three top markets—China, the United States, and ASEAN—recorded declines. Shipments to the United States dropped 8.1% from a year earlier, totaling $10.05 billion. Automobile exports to the U.S., South Korea’s top export item by value, plunged 32% to $1.84 billion. The sharp decline followed Washington’s imposition of a 25% tariff on imported vehicles, effective Apr. 3, and a production shift to Hyundai Motor Group’s newly completed Metaplant in Georgia, which significantly reduced export volumes. U.S.-bound shipments of steel fell 20.6%, while auto parts exports dropped 8.3%.
Exports to China, which had briefly rebounded in April, contracted by 8.4% in May. Semiconductor shipments—long the largest export item to China—fell 14.6% year-on-year. Ahn Ki-hyun, executive director of the Korea Semiconductor Industry Association, said China is ramping up domestic production of low- to mid-end chips, a trend likely to further reduce Korean chip exports to the Chinese market.
Other key export categories to China also saw sharp declines. Petrochemical shipments dropped 11.4%, while general machinery fell 13.6%. Exports to ASEAN markets decreased by 1.3%.
Amid weakening competitiveness and lingering uncertainty over trade policies, prospects for a near-term recovery appear limited. Joo Won, head of economic research at Hyundai Research Institute, noted that Chinese petrochemical and steel products, unable to enter the U.S. market due to tariffs, are instead flooding global markets, displacing South Korean exports.
The Korea Institute for Industrial Economics and Trade projects that South Korea’s total exports will decline by 2.1% this year. Automotive exports, hit by both demand stagnation and tariffs, are expected to fall by 8%.
Jang Sang-sik, head of the International Trade and Commerce Research Office at the Korea International Trade Association, warned that the impact of tariffs could ripple through global trade, suppressing consumption and production. He added that South Korean exports to intermediate manufacturing bases such as China and ASEAN are also likely to remain sluggish.
