Deepening deficit highlights Seoul’s trade challenges

Significance

However, it also experienced its first trade deficit since 2008 (and its largest ever), as energy import costs soared. January’s deficit set a new monthly record, with exports plunging 16.6% year-on-year. The quest for new growth sectors has as yet borne little fruit. Exports remain dominated by familiar stalwarts: above all electronics, but also vehicles, steel and ships.

Impacts

• Cultural exports may help Seoul project soft power, but they contribute little to the overall economy.
• While avoiding abrupt moves or overt confrontation, South Korea will seek to reduce its commercial dependence on China; that will take time.
• Semiconductors, the largest export item, are in a downswing, but car exports will drive steadily forward.