SEOUL – South Korea’s exports extended their slump in August as an escalating feud with Japan adds to uncertainties for the economy already elevated amid the U.S.-China trade war.
Exports fell 13.6 percent in August from a year earlier, a ninth consecutive month of contraction, data from the trade ministry showed Sunday. That compared with economists’ consensus for a 12.5 percent drop. Imports fell 4.2 percent, and the trade surplus was $1.7 billion.
Export weakness has been the main drag on South Korea’s economy this year, weighing on companies’ investment and hiring. Headwinds from trade tensions remain high. Japan, a key supplier of materials and components, formally removed South Korea from its list of trusted trading partners on Wednesday. The U.S. began applying a new round of tariffs on some Chinese imports starting Sunday. Beijing implemented reciprocal measures the same day.
Exports fell in August due to deteriorating external trade conditions, base effect and a drop in operating days, according to a trade ministry statement.
The impact from the Japanese trade sanctions is seen as limited so far, the statement said.
South Korea’s trade data serve as a barometer of global demand due to its early release. The country is the world’s biggest source of memory chips, which go into everything from computers to smartphones.
“Global trade remains in a slump, and a turnaround is not around the corner,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. before the data release. “There are some suggestions that the electronics market may have hit a bottom, and it will be interesting to see if this manifests.”
The Bank of Korea held its benchmark interest rate on Friday, while noting that risks to its 2.2 percent growth forecast have increased.
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