In the midst of global economic fluctuations expected in 2024, South Korea has remarkably showcased its strength in international trade, earning the title "the global trade canary." On January 1, the Ministry of Trade, Industry and Energy of South Korea revealed an impressive export report for the nation, anticipating an 8.2% growth in exports for the entire year, reaching a record high of $683.8 billionNot only has this figure reversed the drop experienced in 2023, marking South Korea's first year with negative growth in three years, but it has also surpassed the previous record of $683.6 billion set in 2022.

This new achievement indicates a significant turnaround since 2023 saw South Korea's total exports at $632.69 billion, which marked the first negative growth since 2020. This recent resurgence is particularly noteworthy since the annual average export figure has also set a new benchmark, reaching $25.3 billion per day, overtaking the 2022's daily average of $25.1 billion.

Notably, among the nine main export destinations for South Korea, seven saw increases over the past year

Exports to China, South Korea's largest trading partner, rose by 6.6% to $133 billion, boosted by robust sales in semiconductors, petrochemical products, and mobile devicesExports to the United States witnessed a remarkable increase of 10.5%, totaling $127.8 billion, continuing a seven-year streak of record-breaking figuresMeanwhile, Southeast Asian countries contributed with a 4.5% growth in exports, reaching $114.1 billion.

According to the Ministry of Trade, Industry and Energy, South Korea has also advanced in the global export rankings, climbing from eighth place in 2023 to sixth place as of January 2024. The country's export growth rate of 9.6% is the highest among the world's top ten exporting countries, as per data from the World Trade Organization.

A significant contributor to South Korea's impressive foreign trade performance is its semiconductor industryThe 2024 import-export report indicates a staggering 43.9% increase in semiconductor exports, amounting to $141.9 billion, which accounted for 20.7% of the total export figure for the year

This too has set a new record, surpassing the previous high of $129.2 billion attained in 2022.

The semiconductor sector consistently delivered stellar performance throughout the quarters, achieving monthly average exports of $10.3 billion in Q1, $11.6 billion in Q2, $12.2 billion in Q3, and escalating to $13.2 billion in Q4. December alone witnessed semiconductor exports soaring to $14.5 billion, a remarkable year-on-year increase of 31.5%, making it the highest figure recorded in that month across all years.

Despite a notable decline in prices for general memory products, exports of high-value products like DDR5 and high bandwidth memory saw growth in the fourth quarter of last year, reinforcing the upward quarterly trends in exportsAll IT product exports, which include semiconductors, wireless communication devices, displays, and computer solid-state drives, have experienced positive growth for the first time since 2021.

Moreover, the surge in investments from tech giants establishing AI data centers in South Korea has spurred demand for semiconductor-related equipment

For instance, in early November last year, SK Telecom, South Korea's biggest telecommunications operator, announced an extensive AI infrastructure construction project, which includes the development of an advanced AI data center in Seoul, aiming to position the city as a key technology hub in Asia.

Besides the semiconductor sector, shipbuilding exports also enjoyed an 18% increase to $25.6 billion, primarily propelled by higher-value ship exportsThis includes a noteworthy uptick in orders for liquefied natural gas carriers and large container shipsFurthermore, the maritime engine exports from South Korea exceeded $900 million last year, marking the highest level in a decade.

In stark contrast, the automotive export sector showed modest performance, tallying up to $70.8 billionThe slowdown was largely attributable to strikes in the automotive and component industries during the second half of the year, which led to production disruptions.

Looking ahead to 2025, the ongoing recovery in export performance offers a semblance of respite to South Korea, which grapples with significant domestic political turmoil

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On December 3 of last year, a state of emergency was declared by President Yoon Suk-yeol, lasting merely six hours but leaving rippling effects on the capital marketThe political landscape continues to draw international scrutiny with discussions about impeachment proceedings against President Yoon.

Recent reports from Dutch financial institutions indicate that the exchange rate of the Korean won against the US dollar is projected to drop by 14% in 2024, potentially hitting a threshold of 1500 in 2025.

Amid questions regarding whether South Korea's stellar export performance from last year can persist into this year, major trade organizations within the country express optimism, forecasting a continued upward trend albeit at a slow paceThe Korea International Trade Association recently predicted a potential steady growth of 1% to 3% in exports for this year.

The Korea Trade-Investment Promotion Agency also released a report at the end of last year projecting that South Korea's export value could reach $730 billion by 2025, reflecting a year-on-year increase of 2.6%.

Lucila Bonilla, a senior economist at Oxford Economics, points out that the current period of political upheaval in South Korea is critically poised

The market has begun to digest the implications of President Yoon’s administration on the economy, noting, “We believe that tariffs may potentially impact the South Korean economy starting in 2026, but they will worsen investment prospects for 2025 as businesses adopt a cautious stance.” The country's parliament and central bank have expended considerable efforts to mitigate market impacts arising from political instability; however, market performance is expected to lag behind predictions, undergoing increased volatility.

Minister of Trade, Industry, and Energy, Ahn Duk-geun, mentioned, “As the new US government takes command, uncertainties are mountingThe government will strive to minimize the adverse effects of external changes and maximize benefits while seizing new opportunities that can support South Korea's economy and businesses.”

Additionally, Bank of Korea’s Governor Lee Chang-yong has publicly stated that compared to domestic political crises, the proposed tariff policies from the US pose a more severe threat to South Korea’s export-driven economy