South Korea Registers First Trade Deficit with China in 31 Years

South Korea has recorded a trade deficit of $18 billion with China in 2023, marking its first such bilateral shortfall with the country in over three decades. According to preliminary trade data released on Monday, South Korean exports to China fell sharply to $124.8 billion, representing a 20% decline from the previous year’s $155.7 billion, while imports from China dipped 8% to $142.8 billion from $154.5 billion.

The substantial drop in exports not only resulted in a trade deficit with China but also shifted South Korea’s trade balance with the world’s second-largest economy from a surplus of $1.2 billion in the previous year to a deficit. This development highlights the challenges faced by South Korea in its economic relationship with China.

However, in a contrasting trend, South Korea experienced a 5% increase in annual exports to the United States in 2023. December figures revealed that monthly shipments to the U.S. surpassed those to China for the first time in two decades, driven by robust sales of cars, auto parts, and automotive batteries. This positive shift in trade dynamics aligns with President Yoon Suk Yeol’s diplomatic approach favoring close ties with Washington.

President Yoon Suk Yeol’s pro-U.S. stance has resonated with major South Korean conglomerates, including Samsung, Hyundai Motor, LG, SK, and Lotte, which have responded by increasing their investments in the United States. The growing exports to the U.S. have contributed to a more favorable trade balance for South Korea with its American counterpart.

Despite these positive developments, South Korea’s overall trade picture in 2023 is marked by a decline. Total exports for the year amounted to $632.7 billion, down 7% from the previous year, representing the first decline in exports in three years. Imports also experienced a significant downturn, falling 12% to $642.7 billion. South Korea recorded a trade deficit of $10 billion, marking its second consecutive year in the red, although this figure represents a narrowing from the $47.8 billion deficit recorded in 2022.

As South Korea navigates the complex global trade landscape, the evolving dynamics with China and the strengthening ties with the United States are poised to shape the country’s economic trajectory in the coming years.