Korean trade shifted toward the U.S. in 2023

[Photo by Kim Ho-young]

2023 was a record-breaking year for South Korea’s export market, with the United States overtaking China as the country’s top exporter for the first time in 20 years since 2003 and Seoul’s falling exports to Beijing leading to its first trade deficit in 31 years.

Data from the Ministry of Commerce Industry and Energy and Korea Customs Service on Monday showed that South Korea sold $11.3 billion in goods and services to the United States in December 2023, compared with export sales of $10.9 billion to China during the same period.

“The United States was Korea’s second largest trade destination for the first time since 2005 and had a smaller gap with China in terms of export volumes compared with 2020,” according to a source familiar with the trade authority.

According to the Ministry of Trade, Industry, and Energy, Korea also had a trade surplus of $44.5 billion with the United States in 2023, primarily driven by record-high auto exports amounting to $70.8 billion. The Korea Automobile Manufacturers Association (KAMA) added that Korean auto exports to the United States hit a record 1,172,612 units from January through November, with notable growth observed in battery-powered and sport utility vehicles.

While exports to the United States increased from a year earlier, Korea saw its first trade deficit with China in 31 years, at $18 billion, with China’s domestic demand remaining slow even as intermediate goods manufacturing ramps up.

Domestic industry experts forecast that Korea’s automobile and shipbuilding exports will grow further in 2024. In response to the surge in automobile exports, Hyundai Glovis Co. announced a substantial investment of 2.4 trillion won in October 2023 for 12 Pure car and Truck Carriers (PCTC) vessels. As container ships powered by liquefied natural gas (LNG), the vessels can carry up to 10,800 small auto vehicles.

Ship exports are also expected to continue growing, with domestic shipbuilders projected to receive significant orders, primarily driven by the demand for LNG carriers and eco-friendly ships in the wake of international environmental regulations. Chip exports, as the core of the economy, are expected to jump significantly, driven by advanced artificial intelligence (AI) and the demand for next-generation semiconductors, such as high bandwidth memory chips.