South Korea is expected to experience a drop in its trade surplus if the United States and Japan successfully clinch a free trade agreement, a think tank said Sept. 16.

Washington and Tokyo started their FTA negotiations in April, with the two anticipated to come up with significant progress soon.

If the two countries reach a deal, Korea is expected to experience a decrease of up to $27.5 billion in its annual trade surplus, according to the Korea Economic Research Institute.

Major victims would include automobile and machine manufacturers, while petrochemical firms and steelmakers may enjoy an increase in exports in return, the report said.

Korea posted a trade surplus of $70.5 billion in 2018, marking the 10th consecutive year the country exported more goods than it bought overseas.

The US-Japan FTA is also anticipated to lead to a decline in the number of exporters in Korea.

The number of exporters in the automobile and electronics sectors may decrease up to 9.2 percent and 11.6 percent, respectively, when the two countries agree to implement a full-scale FTA, the KERI report showed.

Korea, meanwhile, is urged to keep a watchful eye on the pending FTA as Washington and Tokyo may have reached a consensus on the Seoul-Tokyo trade dispute during their FTA negotiations.

By Ram Garikipati and newswires (ram@heraldcorp.com)