Seoul-A new report from the Korea Institute for Industrial Economics & Trade (KIEIT) forecasts a challenging year ahead for South Korean exports, projecting a 0.5% decline in 2025 following recent gains.The KIEIT analysis, released november 24th, highlights a growing divergence between high-tech sectors benefiting from artificial intelligence investment, notably semiconductors, and conventional industries vulnerable to shifting global trade policies and economic headwinds. These developments come as South Korea navigates a delicate balance between bolstering domestic demand and maintaining its position as a major global exporter.
South Korean exports are projected to decline by 0.5% next year, marking a reversal from current trends, according to a new economic outlook report. While the semiconductor industry is expected to thrive on the strength of artificial intelligence demand, sectors like automobiles, steel, and petrochemicals face significant headwinds, including potential tariffs from a renewed Trump administration. This divergence is creating a widening gap in export performance across key industries.
The report, released on November 24th by the Korea Institute for Industrial Economics & Trade (KIEIT), indicates that growth will be largely concentrated in AI-driven sectors like semiconductors and biohealth. “Overall exports will be supported by the AI effect, but the gap within industries is widening, creating a growing structural risk,” the KIEIT stated. KIEIT President Kwon Nam-hoon noted during a briefing that while a recovery seen this year is expected to continue into next year, it will likely slow down. “The steel, refining, and petrochemical industries are facing a double whammy of a global economic slowdown and structural challenges,” he added.
The semiconductor market is forecast to experience a boom, driven by increased global investment in AI and rising demand for high-value products like HBM and DDR5 memory. Exports and production in this sector are projected to increase by 4.7% and 20.5%, respectively. The expansion of data centers in the United States and Europe is also expected to fuel domestic demand, with a projected surge of 70%. KIEIT analysts believe this signals the beginning of a broader AI transformation within the South Korean economy.
However, traditional industries such as automobiles, steel, and refining are bracing for a “triple blow” starting next year. The potential implementation of a 15% tariff on automobiles and tariffs of up to 50% on steel under a second Trump administration are expected to significantly dampen export figures. Steel exports are anticipated to fall by 5%, with production declining by 2%, due to a sharp decrease in shipments to the U.S. and increased competition from Chinese suppliers.
The refining industry is also facing challenges, with exports expected to decline by approximately 16.3% due to stagnant global demand and narrowing refining margins. The automotive sector is projected to see a 0.6% decrease in exports as growth momentum weakens due to reduced U.S. electric vehicle tax credits and increased tariff burdens. Senior Research Fellow Hong Seong-uk explained, “The trade shock that has been the biggest uncertainty throughout this year will begin to materialize in earnest next year.”
Looking ahead to 2026, the KIEIT’s industrial outlook paints a contrasting picture: semiconductors, biohealth, and information and communication technologies are expected to remain positive, while automobiles, steel, refining, and petrochemicals are largely forecast to experience continued challenges. The institute warned that industries lagging in the transition to AI, carbon neutrality, and smart manufacturing could face prolonged structural decline. “It is urgently necessary to diversify export markets and stabilize supply chains to address the widening gap between industries,” the KIEIT emphasized.
The KIEIT projects an overall economic growth rate of 1.9% for next year, supported by strong domestic consumption and the government’s expansionary fiscal policy. This suggests that internal demand will play a crucial role in offsetting some of the negative impacts on the export sector.
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