South Korea’s exports slipped 1.3% in May, ending a three-month growth streak, as U.S. tariffs under Donald Trump’s trade policy and weak Chinese demand hit key industries like autos and petrochemicals.
Seoul (WE) — South Korea’s exports fell 1.3% in May from a year earlier, snapping a three-month streak of gains. The decline was largely due to weakened shipments to the United States, impacted by the Donald Trump administration’s sweeping tariff measures. This downturn marks a shift in the country’s recent export growth momentum.
The Ministry of Trade, Industry and Energy reported that outbound shipments reached US$57.3 billion in May. That compares to $58.02 billion in the same month last year. Imports declined more sharply, down 5.3% year-on-year to $50.3 billion, resulting in a trade surplus of $6.94 billion.
According to officials, the decline in exports was largely attributed to lower shipments to major partners such as the U.S. and China. This decline follows the Trump administration’s decision to impose 25% tariffs on foreign-made vehicles and auto parts, a move that has directly affected South Korean automakers.
Shipments to the U.S. fell 8.1% in May, totaling $10 billion, with the automotive sector taking a noticeable hit. Industry analysts say these losses are a direct result of the new U.S. tariffs. The drop in car exports underscores how vulnerable South Korea remains to shifts in American trade policy.
Exports to China also decreased, falling 8.4% year-on-year to $10.4 billion. That drop came amid weak demand for semiconductors and petrochemical products, both of which are key export items for South Korea. Industry insiders suggest that China’s slowing manufacturing output and rising domestic inventories have reduced demand for imported components.
Shipments to the Association of Southeast Asian Nations (ASEAN) dropped by 1.3%, ending at $10 billion. In contrast, exports to the European Union (EU) rose by 4%, reaching $6 billion. The growth in the EU was driven by continued demand for automobiles and semiconductors, signaling that South Korea still benefits from strong European industrial demand.
Minister of Industry Ahn Duk-geun emphasized that the tariff issue in the U.S. has wider implications. “The U.S. tariffs seem to be affecting the global economy and South Korea’s exports, as proven by the decrease in our shipments to the two largest markets — the U.S. and China,” he stated in a press briefing.
He also pointed to a sharp drop in oil prices as another contributing factor. “The price of crude oil fell to the low $60 range in May. This led to a more than 20% on-year decline in exports of petroleum and petrochemical products,” Ahn said. The reduction in energy prices has hit energy exporters hard, with many oil-based products seeing a significant value decline.
In terms of specific items, South Korea’s most valuable export in May was semiconductors. Chip shipments surged 21.2% year-on-year to $13.8 billion, marking the highest May total on record. This surge was fueled by increased global demand for high-performance chips, including high bandwidth memory (HBM), widely used in AI and data center applications.
Exports of wireless communications devices grew by 3.9% to $1.3 billion, with smartphone exports alone jumping 30%. Analysts believe this jump may reflect the release of new models and strong demand in developing markets. Meanwhile, computers and solid-state drives saw a 2.3% increase, totaling $1.1 billion.
The biohealth sector also performed well. Exports in that category rose 4.5% to $1.4 billion. Shipments of vessels increased by 4.3% to $2.2 billion, supported by long-term orders from overseas clients.
However, the automobile sector faced setbacks. Auto exports dropped 4.4% to $6.2 billion, largely due to weak U.S. demand. Korean brands like Hyundai and Kia have seen increased competition from U.S. and European electric vehicle makers, adding to the challenge posed by tariffs.
Petroleum product exports fell sharply by 20.9% to $3.6 billion. Petrochemical products also dropped 20.8% to $3.2 billion, hit by declining global prices and oversupply in some markets. These sectors have long been staples of South Korea’s export economy, so any slump in this area carries outsized significance.
Despite the broader decline, exports of agro-fisheries and cosmetics products reached record highs. Agro-fisheries rose 5.5%, while cosmetics jumped 9.3%, both hitting $1 billion for the first time in a single month. These gains reflect South Korea’s growing strength in consumer goods, especially in Asian markets, where demand for Korean beauty and food products is rising.
Minister Ahn said the government is monitoring the situation closely and will continue discussions with the U.S. “To minimize the damage to our export companies and maximize national interest, the government will clearly communicate our position on U.S. tariff measures to the Trump administration,” he stated.
He also emphasized the need for long-term resilience. “We are working toward mutually beneficial solutions that support free trade while safeguarding national industries,” he added. Ahn suggested that targeted subsidies and trade missions could help affected sectors regain momentum.
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Experts are divided on whether the drop signals a lasting shift or a temporary setback. According to Park Joon-young, a senior economist at the Korea Institute for International Economic Policy (KIEP), the impact of the Trump tariffs could extend beyond autos. “If similar measures are introduced in electronics or machinery, the ripple effects could be even larger,” he said.
Trade officials are also paying close attention to developments in China. As the country shifts from manufacturing-led growth to a consumption-focused economy, South Korea may need to diversify its export portfolio. “China is still a critical market, but we must recognize that their import structure is changing,” Park noted.
In recent months, the South Korean government has expanded trade talks with partners in the Middle East, India, and Latin America. These efforts aim to reduce overreliance on the U.S. and Chinese markets. Recent agreements with Saudi Arabia and Mexico are part of that broader strategy.
While short-term trends point to challenges, some sectors offer reasons for optimism. The chip industry, in particular, remains a bright spot. Industry leaders such as Samsung Electronics and SK hynix are ramping up investment in high-value chip production to stay competitive.
Shipbuilders like Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries also continue to secure long-term contracts. The resurgence of the global shipping industry is contributing to steady growth in vessel exports, a trend expected to continue into the second half of 2025.
Nonetheless, policy uncertainty remains. Trade tensions between the U.S. and China, as well as possible changes following the upcoming U.S. presidential election, could bring more volatility. South Korea’s economic policymakers are preparing for a range of scenarios.
The Bank of Korea recently lowered its growth forecast for the year, citing export risks and weak domestic consumption. It now expects GDP growth to stay below 2.2% for 2025, down from its earlier forecast of 2.5%.
In the coming weeks, industry leaders are expected to meet with government officials to explore policy support options. This may include export financing, tax credits, and expanded access to overseas markets. The government is also considering launching a task force to coordinate trade response strategies across ministries.
For now, exporters are bracing for continued headwinds. As long as global demand remains uneven and trade policy uncertain, South Korea’s export-driven economy will face ongoing pressure. Still, with key sectors showing resilience and new markets emerging, the country is not without its strengths.
May’s performance may have ended a brief winning streak, but South Korea remains committed to adapting and staying competitive in an evolving global landscape.
