Korea early exports hold up on chip sales despite China lockdown

South Korea’s early trade data showed exports remained resilient in the face of risks to global economic growth and China’s Covid lockdowns that are disrupting supply chains.

Exports advanced 14.5% in the first 20 days of July from a year earlier, the customs office reported Thursday. Overall imports rose 25.4%, resulting in a trade deficit of $8.1 billion.

Exports to China, the biggest buyer of Korean goods, fell 2.5% over July 1-20, reflecting the impact of virus restrictions. In contrast, shipments to the US jumped 19.7% in another sign of strong demand from American consumers.

Overall semiconductor shipments increased 13.2%, underscoring the tech demand that is helping to shore up the 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 virus struggle are adding to supply chain risks. 

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

Labor 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.

Today’s report showed exports to the European Union climbed 18.1% and those to Japan decreased 2.6%. Exports of cars rose 15%, while the sales of wireless communications devices fell 12.2%.

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