Is South Korea at Risk from US Tariffs Due to Export Reliance?
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Synopsis
As the second-largest manufacturing economy in the world, South Korea faces significant challenges due to its dependence on exports, particularly with the looming threat of U.S. tariffs. The ongoing negotiations could shape the future of its economic landscape.
Key Takeaways
- South Korea has a manufacturing sector that accounts for 27.6% of its GDP.
- The country ranks second among OECD nations in terms of manufacturing share.
- Exports contribute to 44.4% of South Korea's GDP.
- There is a significant reliance on the U.S. for exports.
- Ongoing negotiations aim to address potential tariffs that could harm the economy.
Seoul, July 27 (NationPress) South Korea boasts the second-highest share of manufacturing in its gross domestic product (GDP) among major global economies, according to data released on Sunday. This situation highlights the nation's vulnerability to the stringent tariff policies imposed by the United States. The manufacturing sector represented 27.6 percent of South Korea's GDP in 2023, significantly surpassing the average of 15.8 percent for member countries of the Organization for Economic Cooperation and Development (OECD), as reported by the National Assembly Budget Office (NABO).
South Korea ranks second among OECD nations, just behind Ireland, which stands at 31 percent. In comparison, Germany and Japan accounted for 20.1 percent and 20.7 percent of their GDPs, respectively, according to Yonhap news agency.
While many advanced economies are shifting towards a larger service sector, South Korea maintains a comparatively high level of manufacturing output. The NABO emphasized that given the scale of its economy, South Korea is still viewed as a nation with substantial reliance on manufacturing.
The manufacturing industry is the core of the Korean economy, with sectors such as semiconductors, rechargeable batteries, shipbuilding, and automobiles sustaining global competitiveness.
As a nation driven by manufacturing, South Korea's economy is significantly dependent on exports as a key growth driver.
In 2024, exports comprised 44.4 percent of the country's GDP, compared to an OECD average of 30 percent.
Among the G7 nations, Germany leads with an export-to-GDP ratio of 41.8 percent, followed by France at 33.9 percent, Italy at 32.7 percent, and Canada at 32.4 percent. The United States recorded 10.9 percent.
In 2024, South Korea's export dependence on the United States was 18.8 percent.
Given the nation's substantial manufacturing ratio and export reliance on the U.S., the proposed reciprocal tariffs raise concerns about a potential economic downturn.
Negotiations are ongoing between Seoul and Washington, as the Trump administration has indicated that South Korea could face a 25 percent reciprocal tariff unless an agreement is finalized before August 1.
“Should these proposed tariffs come into effect, the Korean economy could experience a severe impact,” stated Yang Joon-seok, an economics professor at the Catholic University of Korea.
“We must capitalize on our strengths in critical sectors like shipbuilding and semiconductors during these negotiations,” he added.
Point of View
It's crucial to recognize South Korea's robust manufacturing sector while addressing the economic risks posed by external factors like U.S. tariffs. The nation must strategically leverage its strengths in key industries to navigate these challenges effectively.
NationPress
27/07/2025
Frequently Asked Questions
What percentage of South Korea's GDP is manufacturing?
In 2023, manufacturing accounted for 27.6 percent of South Korea's GDP.
How does South Korea's manufacturing sector compare to other OECD countries?
South Korea has the second-highest manufacturing share among OECD countries, following Ireland.
What is South Korea's export dependence on the U.S.?
In 2024, South Korea's export dependence on the U.S. stood at 18.8 percent.
What could be the impact of proposed U.S. tariffs on South Korea?
Experts suggest that proposed tariffs could deliver a significant economic blow to South Korea.
Which sectors are key to South Korea's manufacturing strength?
Key sectors include semiconductors, rechargeable batteries, shipbuilding, and automobiles.
