Will US replace China to once again be S. Korea’s top export market?

Posted on : 2023-06-13 16:06 KST Modified on : 2023-06-13 16:27 KST
Trends suggest a possible shift from China to the US for the first time in two decades
Freight containers are loaded onto a ship at a port. (Getty Images Korea)
Freight containers are loaded onto a ship at a port. (Getty Images Korea)

Import and export indicators demonstrate the economic cooperation and connection between South Korea and the US in one glance. From January through May of this year, the US market accounted for 18% of South Korea’s total exports, raising the possibility that South Korea’s top export market could shift from China to the US for the first time in 20 years since 2003.

According to the US Department of Commerce, in 2022, South Korea made up US$186.8 billion (3.5%) of the US’ total global trade (imports and exports of US$5.309 trillion), making it the sixth-largest trading partner for the US.

The US’ neighbors, Canada and Mexico, ranked first and second, while China came in third at 13.0%. That puts South Korea behind only Japan (4.3%) and Germany (4.1%).

Data from the US Department of Commerce also shows that, out of the total global exports of US goods in 2022 (US$2.62 trillion), exports to the Korean market were US$71.4 billion (3.5%), ranking eighth in terms of value. Korean goods made up US$115.3 billion (3.6%) out of the total US imports of foreign goods (US$3.24 trillion), ranking seventh.

2022 trade figures from Statistics Korea show that out of the 95,000 domestic exporter companies, 23,805 exported to the US market. Out of the total 206,000 local importers, 38,330 imported US products.

The trade structure between China and South Korea has been changing rapidly since 2018 in part due to China’s “Made in China 2025” strategy, which emphasizes self-sufficiency, import substitution, and developing domestic industries. This has led to a growing dependency on the US market for Korean products.

Last year, Korea’s exports to the Chinese market made up 22.8% of total exports, while those to the US market made up 16.1%, up from 12% in 2018.,

The gap has narrowed even further in 2023, with exports to China (US$49.7 billion) accounting for 19.6% of Korea’s cumulative exports (US$253.4 billion) in January through May, and exports to the US (US$45.5 billion) accounting for 18%.

According to overseas direct investment statistics from the Export-Import Bank of Korea, Korean capital’s overseas direct investment in the US market (including green-field investments in new and expanded factories and mergers and acquisitions of equity stakes in enterprises) has totaled US$192.9 billion (17,320 new investment enterprises) from 1968 to 2022. Excluding return on investments, South Korean net investments in the US totaled US$162 billion.

From 1968 to 1980, Korea invested a total of US$75 million in the US. That’s an increase of around 2,500-fold.

On the other hand, US capital direct investment in Korea totaled US$42.6 billion (by 6,414 companies) from 1962 to 2022 in terms of arrivals. US capital direct investment in Korea increased from $10.44 million (11 companies) in 1962 to US$2.7 billion in 2022, a 260-fold increase.

By Cho Kye-wan, senior staff writer

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