South Korea’s early July exports hold up on chip sales despite China lockdowns

SEOUL (BLOOMBERG) – South Korea’s early trade data showed that exports remained resilient in the face of risks to global economic growth and China’s Covid-19 lockdowns, which are disrupting supply chains.

Exports advanced 14.5 per cent in the first 20 days of July from a year earlier, the Customs office reported on Thursday (July 21). Overall imports rose 25.4 per cent, resulting in a trade deficit of US$8.1 billion (S$11.3 billion).

Exports to China, the biggest buyer of South Korean goods, fell 2.5 per cent over July 1 to 20, reflecting the impact of its virus restrictions. In contrast, shipments to the United States jumped 19.7 per cent in another sign of strong demand from American consumers.

Overall semiconductor shipments increased 13.2 per cent, underscoring the tech demand that is helping to shore up the South Korean economy.

South Korea’s exports range from cars to ships to smartphones, serving as an early barometer on the state of the world economy. Concerns about a global recession are putting pressure on trade, while Russia’s war on Ukraine and China’s pandemic struggle are adding to supply chain risks.

Central banks are also sticking to a path of higher interest rates to rein in inflationary pressures. With the US Federal Reserve accelerating its policy tightening, trade-dependent nations like South Korea are seeing their deficits swell. In the meantime, their currencies’ falls against the dollar are driving up the cost of raw materials, making it tougher for manufacturers.

Labour disputes are another risk for South Korea’s exports. A strike at a shipyard is disrupting the delivery of vessels, prompting the government to call for an end to the dispute or it will consider tough measures. A strike in June by a nationwide truckers’ union had weighed on exports before it came to a temporary settlement.

The report showed that exports to the European Union climbed 18.1 per cent and those to Japan decreased 2.6 per cent. Exports of cars rose 15 per cent, while the sales of wireless communication devices fell 12.2 per cent.

Oil product exports jumped 109.7 per cent, while imports of crude rose 107.5 per cent in the first 20 days, as energy prices remain elevated around the world. Coal imports soared 148.9 per cent.