[Robert D. Atkinson] Korea’s $700b export record Is an achievement, not a growth strategy

South Korea is poised to surpass $700 billion in exports in 2025, marking the highest total in the nation’s history and a milestone for a trade-dependent economy. But let’s not be so fast with cheers.

To be sure, these export figures reflect competitiveness in key global industries and resilience in the face of US tariffs, robust Chinese competition, supply chain fragmentation, and geopolitical uncertainty. Korea remains a world leader in semiconductors, automobiles, shipbuilding, and electronics, and these sectors continue to drive demand abroad.

But at the same time, the export headline obscures some challenges. First, Korea’s growth model remains overly dependent on a narrow set of export industries. Across Korea’s major export categories, growth is now clustered in a small group of sectors, including semiconductors, autos, and ships while many others are flat or declining. For example, semiconductors account for roughly 28 percent of Korea’s exports, up sharply from the early 2000s. This reflects genuine leadership in advanced chips, including those used in AI servers and data centers. But it also introduces risk for the Korean economy. A downturn in chip sales globally and rising competition from China could be a major disruption.

When export growth is concentrated in a few sectors, the broader economy becomes more vulnerable to downturns that are outside domestic control. Increased exports in other sectors, especially sectors China is weak in, provides needed diversification and risk management

Second, the other side of the trade equation receives far less attention. Korean policy makers see large trade surplus as a sign of success. But what that misses is that by importing less, Koreans consume less. Korea’s trade surplus exceeds $50 billion. Spread across roughly 23 million households, that corresponds to more than $2,000 per household in income. Think of it this way, if Korea imported $50 billion more in goods and services Koreans would be better off.

Recent currency movements underscore this disconnect. Despite sustained current-account surpluses and a strong equity market, the Korean won has remained weak, with exchange rates hovering near levels last seen during periods of acute financial stress. A weak currency means Koreans pay more when they travel outside Korea and they pay more for imported goods and services. In essence, the weak won — which enables strong exports — is essentially a tax on Korean households.

Bank of Korea data show that while the current account posted a substantial surplus through the first three quarters of the year, financial account outflows of a similar magnitude offset much of that inflow. In other words, export earnings are not translating into domestic currency demand or broad-based income growth. This dynamic weakens the traditional link between trade surpluses, currency strength, and household welfare.

For much of Korea’s development history, export-led growth was the right strategy. It allowed a capital-scarce economy to scale quickly, absorb foreign technology, and build firms that had to compete globally. But that phase is complete. Korea is now a high-income economy facing demographic decline, slower productivity growth outside manufacturing, and rising global trade friction. Take relations with America. The core reason the Trump administration negotiated 15 percent tariffs on Korean imports, rather than the 10 percent the UK enjoys is largely due to Korea’s trade surplus with America. Buy importing more from America (and producing more in America as many large Korean firms are doing and plan to do more of), trade tensions with the United States would, I argue, significantly diminish.

But more importantly, Korean economic and trade policy has been on autopilot for 75 years. And it was a major success. But now a strategy that relies on a narrow set of export champions while limiting imports and domestic productivity will struggle to deliver durable prosperity. Korea’s next phase should be driven by economy-wide productivity growth, not just the promotion of exports by a few firms in a few sectors. This would boost incomes and enable more firms to scale. That requires reducing regulatory barriers and focusing growth policy also on services, not just manufacturing.

Trade policy should evolve accordingly. Imports should be treated as a complement to growth, not a threat to it. Lowering non-tariff barriers, encouraging services imports, and opening sheltered sectors to foreign competition would raise household purchasing power, reduce input costs for Korean firms, and reduce concentration risk in exports.

Record exports are an achievement. Korea’s economic strategy now needs to focus on what comes next.

Robert D. Atkinson

Robert D. Atkinson is president of the Information Technology and Innovation Foundation. The views expressed here are the writer’s own. — Ed.

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