South Korea’s manufacturing and export sectors, the backbone of its economy, are bracing for significant challenges in early 2025. (Image courtesy of Yonhap)
SEOUL, Dec. 23 (Korea Bizwire) — South Korea’s manufacturing and export sectors, the backbone of its economy, are bracing for significant challenges in early 2025 due to rising global trade tensions and domestic political instability.
Concerns are growing over protectionist policies from major economies, particularly under the incoming Trump administration, and a leadership void in domestic policymaking.
Semiconductor and Export Downturn Looms
Reports released on December 22 by key organizations, including the Korea Institute for Industrial Economics and Trade (KIET), the Federation of Korean Industries (FKI), and the Korea International Trade Association (KITA), project a grim outlook for South Korea’s industrial and export performance.
KIET’s survey of 133 industry experts revealed that the January 2025 manufacturing sector index is expected to plummet to 75, a sharp decline from December’s 96. This marks the lowest level in over two years, signaling significant economic contraction.
Semiconductors, South Korea’s leading export, face particularly acute pressure. The industry’s index for January is projected to fall to 65, down from December’s 124. This decline follows months of steady deterioration, driven by a drop in demand for legacy memory products and mounting global competition.
Similarly, KITA’s Export Business Sentiment Index (EBSI) for Q1 2025 fell below the benchmark 100, indicating worsening export conditions. Among 15 major export categories, 10—including semiconductors, steel, and machinery—are predicted to face declines.
The semiconductor EBSI, once robust at 135.2 in Q4 2024, has nosedived to 64.4 for Q1 2025.
Global Trade Protectionism Adds Pressure
Compounding the economic challenges is the anticipated shift in global trade dynamics with the inauguration of Donald Trump’s second administration. Protectionist policies, heightened U.S.-China tensions, and potential tariffs are expected to strain South Korea’s export-dependent economy further.
An FKI survey identified weakening demand in key markets, rising trade barriers, and increasing raw material costs as primary concerns among exporters. The U.S. and China, South Korea’s top trading partners, are predicted to pose the greatest difficulties for exporters in 2025.
Calls for Policy Action
Economic experts urge swift government intervention to mitigate the risks. KITA researchers emphasize the need for close monitoring of global trade policies and robust supply chain management.
Lee Sang-ho, head of the Economic and Industrial Division at FKI, stressed that “the government must stabilize foreign exchange markets to enhance export competitiveness, while the National Assembly should avoid passing regulations that undermine corporate vitality.”
With major hurdles ahead, South Korea’s ability to navigate global and domestic turbulence will be pivotal to sustaining its economic momentum.
M. H. Lee (mhlee@koreabizwire.com)
