SEPTEMBERASIA BUSINESS OUTLOOK8NEWSROOMSouth Korea's exports rose 1.3 percent year-on-year in August 2025, marking the third straight monthly increase, driven largely by semiconductor and automobile shipments.Adjusted for working days, exports were up 5.8 percent, consistent with July. Meanwhile, imports declined 4 percent, resulting in a US$6.5 billion trade surplus. The growth comes despite the U.S. imposing a new 15 percent tariff on South Korean imports, ending decades of tariff-free trade. The Bank of Korea Governor, Rhee Chang Yong, said chip and auto exports exceeded expectations, prompting a 0.2 percentage point upward revision to this year's GDP growth forecast.However, he warned the tariff effects could worsen over time, with the central bank maintaining its 2026 growth outlook at 1.6 percent. South Korea's economy is highly export-dependent, with exports accounting for 40 percent of GDP today, compared to 85 percent in 2008. By contrast, most developed economies rely on exports for only 20­30 percent of GDP. The U.S. remains a critical market, absorbing $128.37 billion in South Korean exports in 2024, nearly 19 percent of the total. This heavy concentration, particularly in autos and metals, makes South Korea vulnerable to targeted tariffs.Recent strength in shipments is partly artificial. Companies have been front-loading exports to beat tariff deadlines, leading to a 30 percent surge in semiconductor exports and a 22 percent jump in auto exports in the first 20 days of August. Analysts warn this momentum may fade, as once accelerated shipments are completed, export volumes typically dip, reflecting underlying trade challenges. Thailand's auto parts industry is showing signs of recovery in 2025 after a sharp downturn in 2023, when production and sales fell by around 30 percent, forcing more than 10 manufacturers to shut down.The Federation of Thai Industries' Autoparts Group credits the rebound to rising pickup truck and hybrid vehicle sales, though structural challenges remain. The decline was triggered by high household debt, stricter lending policies, and a rapid shift toward electric vehicles (EVs). Chinese EV makers, now dominant in Thailand, have largely avoided integrating with local suppliers, bypassing decades-old networks and leaving traditional manufacturers struggling. Even large firms like Kitagawa (Thailand), with 2.56 billion baht in registered capital, were forced to close in 2023.This disruption illustrates how technological change can reshape supplier relationships, undermining long-established industry linkages. At the same time, Thailand's competitiveness as a manufacturing hub faces new risks from rising wages. Daily wages have climbed from 300 to 400 baht, with government targets of 600 baht. These costs, combined with regional competition, are driving Japanese carmakers and other OEMs to consider shifting production to lower-cost bases in Vietnam and Indonesia.The stakes are high: Thailand's automotive industry supports over 1.5 million jobs and contributes 10­11 percent of GDP. Cost-cutting measures such as contract terminations and reduced overtime highlight the strain on manufacturers. The recovery in hybrid and pickup truck demand provides short-term relief, but long-term sustainability will require adaptation to EV supply chains and cost pressures. SOUTH KOREA EXPORTS RISE DESPITE U.S. TARIFFS IN AUGUSTTHAILAND AUTO PARTS SECTOR FACES EV AND WAGE PRESSURE· Exports rose 1.3 percent in August, led by chips and autos· U.S. tariffs drive front-loaded shipments, masking risks· Trade surplus hits $6.5B, but growth outlook remains cautious· Thailand's auto parts industry shrank 30 percent in 2023, now rebounding· Chinese EV makers bypass local suppliers, disrupting supply chains· Rising wages push manufacturers to consider relocating to Vietnam/Indonesia
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