South Korea's exports set to rebound in June, but tariff uncertainty weighs: Reuters poll

South Korea's exports are forecast to rebound 4.7% in June, primarily driven by strong semiconductor shipments, following May's decline. Despite this tech-led recovery, economists remain cautious due to ongoing uncertainty surrounding U.S. tariff policies on auto and steel products, which could dampen overall export momentum in the coming quarters.

Analysis

South Korea's export landscape presents a bifurcated picture for June, with a projected 4.7% year-over-year rebound following May's 1.3% contraction. This recovery is almost singularly driven by robust technology demand, as evidenced by a 21.8% surge in semiconductor shipments in the first 20 days of the month. While automotive exports also showed a 9.2% increase in the same period, significant headwinds persist. The primary source of concern, reflected in the cautious tone from economists at Meritz Securities, is the unresolved U.S. tariff situation on automobiles and steel, with a critical negotiation deadline on July 8. This geopolitical uncertainty is compounded by weakening demand from China, as early data indicates a fall in shipments to the country, contrasting with a rise in those to the U.S. The Bank of Korea anticipates the tangible impact of these tariffs to materialize in the third quarter, suggesting that the current strength in headline export figures, led by semiconductors, may mask underlying fragility in broader trade momentum.

Key Decisions for Investors

• Investors should recognize the concentrated nature of the export recovery, potentially favoring exposure to the semiconductor sector while exercising caution with industries like automotive and steel that face direct U.S. tariff risk.
• The divergence between rising exports to the U.S. and falling shipments to China warrants a review of portfolio holdings for geographic revenue exposure, as companies dependent on the Chinese market may face persistent headwinds.
• Closely monitor the outcome of the U.S.-South Korea trade negotiations around the July 8 deadline, as an unfavorable resolution could serve as a negative catalyst for the Korean market and its key export-oriented sectors in the third quarter.
• Given South Korea's role as a bellwether for global trade, this data suggests continued strength in global tech demand but points to increasing fragility in broader merchandise trade, advising a cautious stance on industrials sensitive to protectionist policies.