After two decades of being China's largest trading partner, South Korea is now seeing a shift as the United States takes over this role. Data from the Bank of Korea (BOK) reveals that South Korea's current account surplus with the United States increased by 48.9 percent to US$67.79 billion in just one year. This surge was mainly driven by an increase in exports, particularly passenger vehicle exports, resulting in the largest surplus in the goods balance since 2014. Meanwhile, South Korea's current account with China saw its largest deficit on record, turning from a surplus of US$23.41 billion in 2021 to a deficit of US$7.78 billion in the following year.
The trade deficit with China has been ongoing for nine months, primarily due to a significant decrease in exports of machinery, precision equipment, and petroleum products, while imports of raw materials from China have increased. These sectors have traditionally been the backbone of South Korea's exports to China. As a result, there is a growing possibility that the United States will become South Korea's largest trading partner for the first time in two decades, as the ratio of exports to China and the United States is expected to reverse.
The changing landscape of South Korea's largest trading partner and main export products highlights the need for corporate diversification. Professor Kim Jung-sik from Yonsei University's Department of Economics emphasizes the importance of sharpening export competitiveness by fostering new industries such as biotech and defense. With China rapidly catching up in terms of technological prowess and the ongoing political conflict between China and the United States, recovering exports to China at a fast pace may prove challenging for Corporate Korea.