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Record export numbers mask overreliance on chips, tariff pressures from U.S. and EU

Published: 02 Jan. 2026, 13:35 Updated: 05 Jan. 2026, 19:12

Containers awaiting export abroad are stacked at a pier in Pyeongtaek in this file photo from Oct. 1, 2025. [YONHAP]

Korea’s exports topped $700 billion for the first time last year, a milestone reached by only six countries worldwide. But it is not yet time for celebration.

Structural problems remain masked by a semiconductor-driven “optical illusion,” while rising trade barriers around the world are adding to the burden. This year — when U.S. tariffs and European environmental regulations are expected to be fully reflected in corporate earnings — is likely to be the real test.

Korea’s exports last year rose 3.8 percent from a year earlier to $709.7 billion, according to the Ministry of Trade, Industry and Energy on Thursday.

Semiconductor exports totaled $173.4 billion, up 22.2 percent on year, buoyed by strong demand for high-value products such as HBM and rising fixed prices for memory chips. Semiconductors accounted for 24.4 percent of total exports, far surpassing the previous record of 20.9 percent set in 2018.

Overall exports increased by $26.1 billion from 2025, but that figure can be deceiving: Semiconductor exports alone jumped by $31.5 billion, while total exports excluding semiconductors actually fell 1 percent. This has fueled the view that a semiconductor-driven surge is obscuring a broader export weakness caused by a global economic slowdown.

“Global demand for semiconductors has surged due to the construction of AI data centers, but even in the United States there are questions about profitability,” said Yang Jun-sok, a professor of economics at the Catholic University of Korea. “Overall, export conditions are less favorable than last year.”

If the so-called semiconductor supercycle weakens this year, analysts say it will not be easy to find another engine that can lead Korea’s export drive.

Vehicles for export are parked at Pyeongtaek Port in Pyeongtaek, Gyeonggi on Dec. 4, 2025. [NEWS1]

After semiconductors, automobiles were the biggest export contributor in 2025. Auto exports rose 1.7 percent from 2024 to a record $72 billion. Exports to the United States — Korea's largest market — declined due to tariffs, but Korean makers succeeded in diversifying their export regions to the European Union and the Commonwealth of Independent States (CIS). They also widened their product range to include more environmentally friendly vehicles and used cars.

Ship exports, which surged 24.9 percent on year to $32 billion, and wireless communication devices, which reached $17.3 billion, also pulled their weight.

The growing impact of trade barriers is a key concern. A representative example is the EU’s planned Carbon Border Adjustment Mechanism, which would impose tariff-like costs based on carbon emissions on imports such as steel, aluminum and cement.

The EU has announced plans to expand the scheme to auto parts and refrigerators. Exporters will need to factor the costs into prices starting in 2026, making a decline in price competitiveness unavoidable.

From July 2026, the EU will also transpose the Corporate Sustainability Due Diligence Directive into national law across member states. Companies that fail to meet EU requirements on human rights and environmental standards could face serious obstacles to doing business.

Export-bound containers are stacked at Pyeongtaek Port in Gyeonggi on Dec. 29, 2025. [NEWS1]

“There are many variables, including a U.S. Supreme Court ruling on the International Emergency Economic Powers Act and revisions to China’s Foreign Trade Law,” said Chang Sang-sik, head of international trade research at the Korea International Trade Association.

Tariff pressure is also showing signs of spreading beyond the United States to the rest of North America. In December 2025, Canada tightened the criteria for applying low-tariff rate quotas on steel imports from FTA partners, including Korea. Exports exceeding 75 percent of 2025 volumes will face an additional 50 percent tariff. Mexico has also raised tariffs this year on imports such as auto parts and textiles from countries without FTAs.

Experts stress the importance of diversifying export items and markets as well as identifying high-value-added products to lead a “post-semiconductor” era.

“Securing core technologies and stabilizing supply chains have become absolute priorities,” said Kwon Nam-hoon, president of the Korea Institute for Industrial Economics & Trade (KIET).

“Rather than simply aiming to export more, we need strategies that take into account policy shifts by country and economic bloc, as well as economic security,” said Heo Yoon, a professor at Sogang University’s Graduate School of International Studies.

One consolation is the strong performance of K-food and K-beauty exports, riding the Hallyu wave. Agricultural and fisheries products posted exports of $12.4 billion in 2025, marking their 10th consecutive year of growth, while cosmetics exports rose 12.3 percent to $11.4 billion. Exports to the Asean region increased 7.4 percent, helping ease excessive reliance on a select handful of markets.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK, NAM SOO-HYOUN [[email protected]]