How is South Korea's Current Account Surplus Expanding Amid US Tariff Pressure?

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How is South Korea's Current Account Surplus Expanding Amid US Tariff Pressure?

Synopsis

South Korea's current account surplus surged to an impressive US$10.14 billion in May, despite declining exports. Factors like falling oil prices and rising dividend income fueled this growth. As trade tensions with the U.S. persist, what does this mean for South Korea's economy? Discover the implications in our detailed analysis.

Key Takeaways

  • Current account surplus widened to US$10.14 billion in May.
  • Factors include falling oil prices and increased dividend income.
  • 25 months of continuous surplus reported.
  • Trade tensions with the U.S. are becoming more pronounced.
  • Negotiations on tariffs are critical for future trade relations.

Seoul, July 4 (NationPress) South Korea's current account surplus has expanded in May compared to the previous month, despite a decline in exports. This growth is primarily attributed to a decrease in global oil prices and a rise in dividend income, as revealed by central bank statistics on Friday.

The current account surplus for May totaled US$10.14 billion, up from $5.7 billion in April, based on data from the Bank of Korea, as reported by Yonhap news agency.

This marks the 25th consecutive month of a current account surplus, with South Korea reporting a surplus every month since May 2023.

In May, the surplus was the third largest on record, following $11.31 billion in 2021 and $10.49 billion in 2016.

For the first five months of this year, the total current account surplus reached $35.11 billion, a rise from $27.06 billion during the same timeframe last year.

The goods account recorded a surplus of $10.66 billion in May, amid a 2.9 percent decline in exports to $56.93 billion and a 7.2 percent drop in imports to $46.27 billion, driven by reduced imports of raw materials.

Conversely, the services account experienced a deficit of $2.28 billion in May, primarily due to increased demand for overseas travel.

The primary income account, which tracks wages of foreign workers, dividend payments from abroad, and interest income, reported a surplus of $2.15 billion in May.

"The reductions in both exports and imports in May can largely be attributed to external factors, including the global trade climate and declining oil prices," stated BOK official Song Jae-chang during a press conference.

"The influence of U.S. tariffs is becoming more apparent, especially in sectors such as automobiles and steel," Song added. "This effect is expected to intensify in the latter half of this year."

In April, the administration of U.S. President Donald Trump initiated reciprocal tariffs on partner nations, including 25 percent duties on South Korean goods, although the implementation of this new tariff plan was temporarily halted to facilitate bilateral negotiations.

South Korea and the U.S. have committed to finalizing a "package" agreement regarding trade and related matters before July 8, the deadline for the 90-day suspension of reciprocal tariffs.

A separate 10 percent baseline tariff and 25 percent duties on steel, aluminum, and automobile-related products remain effective.

Trade Minister Yeo Han-koo is set to visit the U.S. this week for urgent negotiations.

Point of View

This sustained surplus highlights South Korea's resilience in a challenging global trade environment. While facing external pressures such as U.S. tariffs, the country demonstrates an ability to adapt and thrive. The situation calls for strategic negotiations and a focus on strengthening economic ties.
NationPress
22/07/2025

Frequently Asked Questions

What factors contributed to the increase in South Korea's current account surplus?
The increase in South Korea's current account surplus was primarily driven by falling global oil prices and a rise in dividend income, despite a decline in exports.
How does the current account surplus affect South Korea's economy?
A strong current account surplus indicates that South Korea is earning more from trade and investments than it is spending, which can bolster the national economy and strengthen the currency.
What impact do U.S. tariffs have on South Korea's exports?
U.S. tariffs have begun to affect South Korean exports, particularly in the automotive and steel sectors, creating challenges for trade relations between the two countries.
When is the deadline for the pause on reciprocal tariffs?
The deadline for the pause on reciprocal tariffs is July 8, when negotiations between South Korea and the U.S. are expected to conclude.
What is the significance of the ongoing trade negotiations with the U.S.?
The ongoing trade negotiations are crucial for South Korea to navigate the complex tariff landscape and establish favorable terms that protect its economic interests.