"Canary" brings good news! South Korea's preliminary exports in January grew by 14.9%, with chip exports surging 70%.
South Korea’s exports see a “red-hot” start. Korea, known as the global economy’s “canary in the coal mine,” recorded a 14.9% year-on-year export growth in the first 20 days of January, mainly driven by surging semiconductor demand fueled by the global artificial intelligence boom.
On January 21, according to data released by the Korea Customs Service, exports adjusted for working days in the first 20 days of January rose by 14.9% year-on-year, with the growth rate accelerating further compared to last month. Among them, semiconductor exports soared by 70.2% YoY, continuing the previous growth momentum, mainly benefiting from strong global demand for AI and data center investment.
However, due to the latest US tariff measures and a global slowdown in demand, automobile exports fell by nearly 11% year-on-year and ship exports dropped by 18%. Despite structural pressures, the strong performance of semiconductors and other high-tech categories helped narrow the monthly trade deficit to $626 million.
Bloomberg economist Hyosung Kwon pointed out that the current data confirms the AI-driven semiconductor supercycle is becoming the core support for Korean exports. Although some sectors face headwinds from trade policy, the tech-led export structure has demonstrated remarkable resilience, providing Korea with a crucial buffer against external uncertainties.
Chip exports become the main engine of growth
Semiconductors continue to be the core driver of Korea’s export growth. According to trade data from the first 20 days of January, chip exports soared by 70.2% YoY, maintaining strong growth driven by global AI and data center investment. This standout performance effectively cushioned the weakness in exports from more traditional sectors like automobiles and ships amid external pressures.
South Korea’s critical role in the global semiconductor supply chain has become more pronounced. For the whole of 2025, Korea’s export volume reached a record $709.4 billion, up 3.8% year-on-year, with semiconductor shipments jumping 22% due to strong AI-related demand, demonstrating its structural advantage and resilience in the global high-tech industrial chain.
According to CCTV News, the White House announced on January 14 that it would impose a 25% ad valorem tariff on some imported semiconductors, semiconductor manufacturing equipment, and derivatives starting January 15. According to CCTV News, US Commerce Secretary Gina Raimondo later warned that if Korean memory chip manufacturers do not increase production in the US, they may face tariffs as high as 100%.
Meanwhile, exports of wireless communication equipment and petrochemical products increased significantly by 48% and 18%, respectively, further enhancing Korea’s export structure and overall trade resilience.
Regionally, exports to China grew by 30.2%, to the US by 19.3%, indicating stable demand in major markets. However, exports to the EU and Japan fell by about 15% and 13%, respectively, showing significant market structural differentiation due to global economic and policy differences.
Automotive industry pressured by US tariffs
Automobile exports were the main drag on Korea’s trade data for January, declining nearly 11% year-on-year and directly reflecting the dual pressure of escalating US tariff policies and weakening global demand. Ship exports also fell by 18%, further confirming the headwinds faced by some traditional manufacturing sectors.
Although Korea and the US previously reached a milestone trade agreement, setting an import tariff cap on Korean goods at 15% and lowering tariffs on automobiles and auto parts retrospectively from last November, these rates remain significantly higher than the preferential arrangements under existing free trade agreements, resulting in continued pressure on relevant industries.
As an open economy with exports accounting for over 40% of GDP, structurally higher tariffs have raised concerns about South Korea’s long-term export competitiveness. How to rebalance between the momentum of the tech sector and pressure on traditional industries will be a key challenge for Korea as it responds to changes in the external trade environment.
Currency depreciation brings a double-edged sword effect
The continued weakening of the Korean Won has been a key support for Korea’s exports, with the Won depreciating by over 8% against the US dollar since the end of June. Currency depreciation enhances the price competitiveness of export products overseas, but also significantly increases import costs, thereby intensifying inflationary pressure. Currently, both Korea’s headline and core consumer price indexes have remained above the central bank’s 2% policy target; the central bank previously warned that further Won depreciation would increase price pressures on imported goods, raw materials, and components.
Against this backdrop, the Bank of Korea last week held its benchmark interest rate steady at 2.5% for the fifth consecutive time, and by deleting references to “considering a future rate cut” from its policy statement, essentially shifted to a neutral policy stance. Central Bank Governor Rhee Chang-yong said that both upside and downside risks are present in the current economic outlook, and the Monetary Policy Committee will decide on its next move after reviewing subsequent data.
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