Why Korea is wary of celebrating its record trade surplus with the US

Posted on : 2024-04-08 17:13 KST Modified on : 2024-04-08 17:18 KST
The possibility of Trump being reelected is pushing South Korea into a conundrum over trade with the US
Former US President Donald Trump. (Yonhap)
Former US President Donald Trump. (Yonhap)

Despite growing to its highest point in history, South Korea’s trade surplus with the US has proven to be somewhat of a headache for Seoul. Concerns are rising that if Donald Trump wins the US presidential election in November, he could use the trade surplus to exert economic pressure on Korea. Some observers say that Seoul should strategically prepare a plan to balance out the trade surplus by increasing imports of gas and other US products.
According to statistics from the Korea International Trade Association released on Sunday, South Korea's trade balance (exports minus imports) with the US reached US $44.4 billion in 2023, making it the largest surplus in the history of the two nations’ trade relationship and a 58.6% from the year prior. 
South Korea’s trade surplus with the US has been growing rapidly over the past three years, after shifting from a deficit to a surplus in 1998. The trade surplus with the US in the first three months of 2024 was US$13.26 billion, which is likely to set South Korea on the road toward a new record for the largest annual surplus.
South Korea’s largest export market is also shifting from China to the US. In December 2023, the largest monthly export market changed from China to the US for the first time in nearly 20 years, and exports to the US outpaced exports to China in February and March this year.
Trade with the US, which is centered around automobiles, has been soaring. In 2023, automotive exports to the US grew 44.6% year-on-year, and rechargeable battery exports grew 16.8%. The US policy of subsidizing companies that build factories within the country is also boosting South Korean exports to the US.
As Korean companies build semiconductor, rechargeable battery, and electric vehicle plants in the US, exports of related equipment are also increasing. The growth rate of machinery exports to the US reached 100.2% in 2023.
The increase in exports to America has been invaluable to South Korea at a time when exports to China have been sluggish. However, the possibility of Trump’s reelection is pushing South Korea into a conundrum over trade with the US.
On Agenda 47, a website containing Trump’s platform for a return to the White House, Trump claims that the US auto industry “was devastated by a flood of cheap foreign imports from Japan and Korea, destroying entire towns and cities in the American Heartland.”

He has pledged to impose a 10% tariff on all imports, with higher tariffs for countries boasting large trade surpluses with the US. South Korea now ranks among the top 10 countries with which the US has a trade deficit, moving up to eighth place in 2023 after being ranked ninth in 2022.
Trump may use South Korea’s trade surplus with the US to apply economic pressure, such as designating South Korea as a currency manipulator.
Experts are calling for preemptive action. Since it is impossible for companies to artificially reduce exports, they say that the government needs to step up.
“If Trump is elected, US pressure on South Korea’s trade surplus with the US will intensify,” the Korea Institute for Industrial Economics and Trade said in a report last month. 

“Considering that the government has previously, during the last Trump administration, promoted and implemented measures such as expanding the purchase of US shale gas, it is necessary to once again come up with measures to strategically reduce the trade surplus,” the report advised.

By Jun Seul-gi, staff reporter

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