South Korea's export growth slowed to a seven-month low in October, falling short of market expectations, indicating that cooling global demand and uncertainty about the US election are hurting the Korean economy.

According to official data from the Korea Customs Service on Friday (November 1), exports from the fourth-largest Asian economy increased 4.6% to 57.52 billion US dollars over the same period last year, the smallest increase since March, and still below expectations of 6.9%. This figure is slower than the 7.5% increase in September, and it is also the third month in a row that export growth has slowed.

Furthermore, the export value in October after adjustment for differences in working days fell by 0.2% compared to the same period last year, the first decline since September 2023.

Stephen Lee, chief economist at Meritz Securities, anticipates that exports will receive some support from industrial materials against the backdrop of falling interest rates and a recovery in global manufacturing, but this recovery appears to have been delayed due to the US election and the growing uncertainty of the global economic cycle itself.

The latest trade data is consistent with a previous survey, which showed that factory activity in South Korea contracted for the second month in a row in October, with the biggest drop in output in 16 months.

Export segmentation

Looking at the breakdown of export data, due to falling oil prices, the export value of petroleum products fell by 34.9% year-on-year in October, which had a huge impact on overall exports.

Furthermore, semiconductor exports increased by 40.3% in October compared to the same period last year. Although there was a recovery compared to the previous month, it is still lower than the 50% increase for most of this year.

Smartphones are also a major source of revenue in South Korea, but demand is likely to wane in the coming year. Samsung said during its conference call this week that the global smartphone market is expected to grow less than 1% in 2025 after growing more than 2% this year.

The impact of the US election

The weak data released on Friday highlighted the risks facing South Korea's economic growth prospects.

Due to the instability of domestic consumption in South Korea, the country's economic activity this year is mainly dependent on external demand. After the Bank of Korea cut interest rates last month, although consumer spending has gradually shown signs of recovery, the South Korean economy showed little growth in the third quarter due to weakening exports. Economists point out that this has increased the possibility that the government will introduce more stimulus measures to support economic growth.

Furthermore, the South Korean economy, which is heavily dependent on global trade, will also be potentially affected by the US election, as South Korea is the country most vulnerable to trade tensions.

South Korea's Minister of Industry, Trade and Resources, Andegen said on Friday, “We are comprehensively evaluating the potential impact of next week's US election on various industries.”

Korea Institute for International Economic Policy (Korea Institute for International Economic Policy), South Korea's official think tank, estimated this week that if Republican candidate Trump wins the presidential election and includes South Korea in the scope of “imposing a 20% general tariff on imported goods from the US” proposed by Trump, South Korea's export losses will reach 44.8 billion US dollars.

Edit/Rocky