South Korea’s export sectors are bracing for significant challenges next year, hindered by global trade tensions and domestic political uncertainties, industry reports showed Monday.

Three reports from major business organizations, including the Federation of Korean Industries, the Korea International Trade Association and the state-run think tank Korea Institute for Industrial Economics and Trade, painted a grim outlook for the export-dependent economy in 2025.

The FKI said a poll of major companies in 12 key export sectors forecast a mere 1.4 percent increase in exports next year compared to 2024. The survey was conducted on 150 major companies by Monoresearch, a market research firm, on behalf of the FKI.

By industry, the bio-health sector is projected to see the largest growth at 5.3 percent, followed by general machinery at 2.1 percent, petrochemicals and petroleum products at 1.8 percent, electronics -- which include semiconductors -- at 1.5 percent, and shipbuilding at 1.3 percent. However, exports of automobiles and parts are forecast to decline by 1.4 percent, while steel exports are expected to drop by 0.3 percent.

Companies anticipating a drop in exports cited major challenges, with sluggish economic conditions in key markets at 39.7 percent; heightened protectionism, including tariffs, at 30.2 percent; and weakened price competitiveness due to rising raw material and oil costs at 11.1 percent.

KITA also suggested a tough year ahead for South Korea’s export conditions.

The report revealed that its export business survey index for the first quarter of 2025 fell to 96.1, dipping below the baseline of 100 for the first time in four quarters. A reading below 100 means pessimists outnumber optimists, while a reading above the threshold indicates the opposite. The survey involved 1,010 exporting companies.

Among the 15 major export sectors surveyed, 10 fell below the benchmark, with the home appliance sector reporting the lowest at 52.7. The KITA attributed this decline to weakened demand in key markets such as North America and Europe.

Similarly, the semiconductor sector raised concerns with an index of 64.4. Respondents cited intensified competition from China’s aggressive DRAM expansion and increased chip inventories for smartphones and PCs as contributing factors to the downturn.

Meanwhile, the sectors that projected a relatively rosy outlook included shipbuilding with a reading of 146.4; household goods with 137.9; automobiles and auto parts with 130.7; chemical industries with 121.5; and plastic, rubber and leather products with 100.5.

The survey by KIET painted a similarly grim picture for semiconductors.

In its poll of 133 industry experts, the manufacturing industry's professional survey index for January plunged to 75, down 21 points from December’s forecast of 96.

Particularly alarming was the semiconductor industry. The January PSI for semiconductors declined sharply to 65, a 59-point drop from December’s 124.

Many companies are attributing the anticipated downturn to a possible escalation in global protectionism with the inauguration of a second Trump administration in Washington.

The KITA report also noted that major export companies are increasingly concerned about the worsening trade environment following Trump's second term.

In FKI's survey, 48.7 percent of respondents identified the US as the most challenging market for export, followed by China at 42.7 percent. It noted that the results reflect companies’ concerns that export conditions to the US and China will worsen as US-China tensions heighten following President Donald Trump's election.

“Due to a global economic slowdown and weakening competitiveness in key industries, South Korea’s exports are expected to decelerate significantly next year,” said Lee Sang-ho, head of the FKI’s economic policy division. “If the Trump administration actually imposes universal tariffs, export conditions could deteriorate further.”

Lee called on the Korean government to focus on stabilizing the foreign exchange market and minimizing damage from rising protectionism. He also urged lawmakers to prioritize bills that enhance export vitality.

By Ahn Sung-mi (sahn@heraldcorp.com)