South Korea faces risks from US tariff due to reliance on exports, manufacturing

Seoul, July 27 (IANS) South Korea has the second-highest share of manufacturing in its gross domestic product (GDP) among major economies, data showed on Sunday, underscoring its vulnerability to the aggressive tariff measures by the United States.

The manufacturing sector accounted for 27.6 per cent of South Korea's GDP in 2023, far higher than the average 15.8 per cent of the member countries of the Organisation for Economic Cooperation and Development (OECD), according to the National Assembly Budget Office (NABO).

It ranked second among OECD member countries, following Ireland at 31 per cent. By comparison, Germany recorded 20.1 per cent and Japan 20.7 per cent.

"While most advanced economies are seeing an increasing share of the service sector, South Korea continues to maintain a relatively high level of manufacturing output," the office said. "Given the size of its economy, South Korea is still regarded as a country with a relatively high dependence on manufacturing."

The manufacturing sector remains the backbone of the Korean economy, with key industries, including semiconductors, rechargeable batteries, shipbuilding and automobiles, maintaining global competitiveness.

Driven by its manufacturing-based economy, South Korea remains highly dependent on exports as a key growth engine.

As of 2024, exports accounted for 44.4 per cent of the nation's GDP, compared with the OECD average of 30 per cent.

Among the Group of Seven (G7) nations, Germany posted the highest export-to-GDP ratio at 41.8 per cent, followed by France with 33.9 per cent, Italy with 32.7 per cent and Canada with 32.4 per cent. The US recorded 10.9 per cent.

South Korea's export dependence on the US stood at 18.8 per cent in 2024, Yonhap news agency reported.

Given the country's high manufacturing ratio and export reliance on the US, the envisioned reciprocal tariffs are feared to deliver a major economic blow.

Last-minute negotiations are under way between Seoul and Washington, as the Donald Trump administration has warned that South Korea will face a 25 per cent reciprocal tariff unless a deal is reached before August 1.

"If the proposed reciprocal tariffs take effect, the Korean economy could suffer a significant impact," said Yang Joon-seok, an economics professor at the Catholic University of Korea.

"We should leverage our strengths in key sectors, such as shipbuilding and semiconductors, during the negotiations," he added.

--IANS

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