South Korea

Change in 2017 from 2016:

• U.S. total exports to South Korea: increased by $6 billion (14 percent) to $48.3 billion
• U.S. general imports from South Korea: increased by $1.3 billion (2 percent) to $71.2 billion
• U.S. trade deficit with South Korea: decreased by $4.7 billion (17 percent) to $22.9 billion

U.S. Total Exports

U.S. total exports to South Korea increased by $6 billion (14 percent) to $48.3 billion in 2017, a five-year high. The two sectors that contributed the most to the growth in total exports in 2017 were machinery (up $3.1 billion, 55 percent) and energy-related products (up $2.5 billion, 143 percent). Total export growth of 14 percent was offset slightly by a decline in some sectors, principally by a decline of $2.3 billion in exports of transportation equipment.

Table KR.1: Korea: U.S. total exports, general imports, and merchandise trade balance, by major industry/commodity sectors, 2013–17

	Million $
Item	2013	2014	2015	2016	2017	Absolute change, 2016–17	Percent change, 2016–17
U.S. total exports:
Agricultural products	5,837	7,511	6,747	6,842	7,473	631	9.2
Forest products	866	890	826	791	788	-3	-0.4
Chemicals and related products	7,163	7,436	6,905	6,532	7,155	622	9.5
Energy-related products	1,560	2,148	1,392	1,733	4,211	2,477	142.9
Textiles and apparel	409	391	380	316	310	-6	-2.0
Footwear	94	88	74	53	45	-8	-14.5
Minerals and metals	4,081	3,696	3,214	2,556	2,603	47	1.9
Machinery	5,943	6,817	6,231	5,622	8,700	3,078	54.8
Transportation equipment	6,382	6,151	7,847	8,584	6,308	-2,275	-26.5
Electronic products	7,974	8,022	8,388	7,653	9,110	1,457	19.0
Miscellaneous manufactures	768	811	823	989	863	-126	-12.8
Special provisions	571	686	656	638	711	73	11.5
Total	41,649	44,650	43,484	42,309	48,277	5,967	14.1
U.S. general imports:
Agricultural products	638	673	739	810	844	34	4.2
Forest products	540	616	578	544	537	-7	-1.2
Chemicals and related products	5,030	5,858	6,225	8,511	7,544	-966	-11.4
Energy-related products	3,035	3,067	2,922	2,266	2,874	609	26.9
Textiles and apparel	1,313	1,331	1,326	1,271	1,234	-37	-2.9
Footwear	23	18	22	27	45	17	63.7
Minerals and metals	5,550	7,716	6,908	5,309	5,819	509	9.6
Machinery	6,635	7,110	7,579	7,068	7,895	828	11.7
Transportation equipment	20,868	23,960	27,015	25,314	25,304	-10	(a)
Electronic products	16,701	17,379	16,167	16,550	16,813	263	1.6
Miscellaneous manufactures	828	821	895	968	888	-80	-8.2
Special provisions	1,212	1,128	1,380	1,243	1,366	123	9.9
Total	62,370	69,677	71,758	69,881	71,164	1,283	1.8
U.S. merchandise trade balance:
Agricultural products	5,199	6,839	6,008	6,032	6,629	597	9.9
Forest products	326	274	248	247	251	4	1.4
Chemicals and related products	2,133	1,578	680	-1,978	-390	1,589	80.3
Energy-related products	-1,474	-918	-1,530	-532	1,337	1,869	(b)
Textiles and apparel	-904	-940	-946	-955	-924	30	3.2
Footwear	71	70	51	26	1	-25	-98.0
Minerals and metals	-1,469	-4,020	-3,694	-2,754	-3,216	-462	-16.8
Machinery	-691	-292	-1,348	-1,446	805	2,250	(b)
Transportation equipment	-14,486	-17,809	-19,169	-16,730	-18,995	-2,265	-13.5
Electronic products	-8,726	-9,357	-7,779	-8,897	-7,703	1,194	13.4
Miscellaneous manufactures	-59	-10	-72	21	-25	-47	(b)
Special provisions	-641	-442	-724	-606	-655	-49	-8.2
Total	-20,722	-25,027	-28,273	-27,572	-22,887	4,684	17.0

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data. Sectors are ordered by the level of processing of the products classified therein.
      ^aLess than 0.05 percent.
      ^bNot meaningful for purposes of comparison.

South Korea has a well-developed and growing economy, fueled in part by growing exports of electronics and semiconductors. To make these goods, the country’s supply of industrial machinery has needed to grow as well. Thus, South Korea’s machinery sector^[1] accounted for the second-largest share (18 percent) of total U.S. exports to South Korea in 2017 and accounted for the largest absolute increase in the value of U.S. total exports. South Korea was the fourth-largest market for U.S. exports of machinery and the largest market for U.S. exports of semiconductor manufacturing equipment. U.S. machinery sector exports to South Korea rose primarily as a result of a significant increase in shipments. U.S. exports of semiconductor manufacturing equipment to South Korea increased 100 percent between 2016 and 2017 (from $3.1 billion to $6.2 billion).^[2] 

As a major semiconductor producer, South Korea has been a leading U.S. export market for semiconductor manufacturing equipment for the past five years. Two South Korean firms, Samsung Electronics and SK Hynix, account for 70 percent of the global memory chip market.^[3]  Demand for semiconductors is driven by growing global demand for downstream products such as communication and electronic devices, computers, and industrial and automotive electronics that include semiconductors as inputs.^[4] Rising dynamic random-access memory (DRAM) prices also contributed to South Korean demand for semiconductors and the machinery to manufacture them.^[5] While South Korea is a leading producer of both the semiconductors that are incorporated into downstream products and the downstream products (like consumer electronics) that rely on semiconductors as key inputs, South Korea is not a leading producer of semiconductor manufacturing equipment.^[6]  American companies are leaders in the semiconductor manufacturing equipment sector and account for a 47 percent share of the world market. ^[7] These companies are well established as suppliers in the South Korean market and rely on exports.^[8]  South Korean firms’ continued investment in semiconductor manufacturing and in upgrading fabricating equipment contributes to U.S. exports of these products.^[9]

The energy and related products sector accounted for $4.2 billion (9 percent) of total U.S. exports to South Korea, but represented the largest percentage increase in exports (143 percent) in 2017, an absolute increase of $2.5 billion.^[10] South Korea was the seventh-largest market for U.S. exports of all energy products, but the fifth-largest market for both U.S. crude petroleum and U.S. natural gas products in 2017. South Korea is one of the world’s largest energy consumers, and due to insufficient domestic energy reserves, it is heavily dependent on energy imports to meet demand. South Korea ranks among the world’s top importers of natural gas, coal, crude petroleum and refined products, and its demand is growing.^[11]  Because it has no cross-border oil or gas pipelines, South Korea relies primarily on tanker shipments to deliver its liquefied natural gas (LNG) and crude petroleum imports.^[12]

Table KR.2: Korea: Leading changes in U.S. exports and imports, 2013–17

	Million $
Item	2013	2014	2015	2016	2017	Absolute change, 2016–17	Percent change, 2016–17
U.S. total exports:
Increases:
Energy-related products: Crude petroleum (EP004)	0	74	58	181	1,122	941	520.8
Natural gas and components (EP006)	73	234	496	897	1,815	918	102.4
Telecommunications equipment (EL002)	435	364	413	621	1,326	705	113.4
Non-metalworking machine tools (MT018)	21	17	10	22	20	-2	-8.6
Decreases:
Aircraft, spacecraft, and related equipment (TE013)	3,289	2,871	4,430	5,192	3,327	-1,865	-35.9
All other	37,831	41,090	38,077	35,397	40,667	5,270	14.9
Total	41,649	44,650	43,484	42,309	48,277	5,967	14.1
U.S. general imports:
Increases:
Petroleum products (EP005)	2,846	2,906	2,805	2,204	2,811	608	27.6
Steel mill products (MM025)	3,058	4,303	3,483	2,347	2,787	439	18.7
Semiconductor manufacturing equipment (MT019A)	497	831	513	440	790	350	79.4
Decreases:
Medicinal chemicals (CH019)	68	112	291	2,474	1,293	-1,181	-47.7
Motor vehicles (TE009)	12,147	14,577	17,282	16,071	15,734	-337	-2.1
All other	43,754	46,947	47,384	46,345	47,748	1,403	3.0
Total	62,370	69,677	71,758	69,881	71,164	1,283	1.8

Source: Compiled from official statistics of the U.S. Department of Commerce.
Note: Import values are based on customs value; export values are based on free along ship value, U.S. port of export. Calculations based on unrounded data.

The value of U.S. exports of energy-related products to South Korea increased from $1.7 billion in 2016 to $4.2 billion in 2017 (a 143 percent increase). Within the energy sector, crude petroleum and natural gas products led this export growth.^[13] U.S. exports of crude oil from petroleum jumped by $941 million, a 521 percent increase over 2016, due in part to the removal of restrictions on U.S. exports of crude oil in late 2015. ^[14] Total U.S. crude exports increased from 216 million barrels in 2016 to 408 million barrels in 2017; U.S. crude exports to South Korea grew from 4 million barrels in 2016 to 21 million barrels in 2017.^[15] Expanded infrastructure that came online in 2017 included several new or expanded U.S. pipelines that facilitate crude oil transport from inland production regions to the Gulf Coast for shipping to overseas markets.^[16] In addition, expanded port infrastructure along the U.S. Gulf Coast and along the Mississippi River also made larger volumes of crude oil exports possible.^[17] Favorable global benchmark pricing (between Brent crude and West Texas Intermediate crude oil) also made U.S. crude oil prices more attractive, spurring U.S. exports.^[18] Finally, the South Korean government introduced tax incentives to encourage South Korean refiners to purchase crude oil from suppliers outside the Middle East.^[19]     

U.S. exports of natural gas and components to South Korea increased by $918 million (102 percent), driven largely by a $574 million increase in LNG exports. South Korea is the world’s second-largest LNG importer,^[20] and in 2017, South Korea became the second-largest market for U.S. exports of LNG, accounting for 17 percent of total U.S. LNG exports.^[21] South Korea meets all of its natural gas demand through LNG imports and prefers to purchase under long-term contracts with prices linked to the oil market.^[22] U.S. exports to South Korea were part of long-term contracts between two sellers—Cheniere Energy and Shell—and South Korean natural gas buyers, primarily South Korean utilities. Favorable price differentials between LNG price benchmarks helped drive increased LNG exports from the United States to South Korea.^[23]  South Korean demand for LNG was also partly boosted by domestic policy decisions to lessen dependence on coal and nuclear energy.^[24]  On the supply side, domestic capacity expansion at Cheniere’s U.S. LNG export terminal in Louisiana also contributed to export growth.^[25]  All U.S. LNG exports in 2016 and 2017 came from the Louisiana terminal (Sabine Pass), which started up in February 2016 with a capacity of 0.7 billion cubic feet per day and had expanded to 2.8 billion cubic feet per day by the end of 2017.^[26]

The overall increase in total U.S. exports to South Korea was partially offset by a 27 percent decline in U.S. exports of transportation equipment (from $8.6 billion in 2016 to $6.3 billion in 2017).^[27] Although its imports from the U.S. declined in 2017, South Korea remained the 13th-largest market for U.S. exports of transportation equipment. The decline in transportation sector exports in 2017 was primarily driven by a spike in those exports the previous year—namely, a $1.1 billion defense contract purchase of new military helicopters that was mostly completed in 2016. Because of its long-standing military alliance with the United States and a large U.S. military presence in South Korea, most South Korean defense systems are based on U.S. standards, which in turn affect defense procurement decisions to the benefit of U.S. exporters.^[28]  In 2013, Boeing announced that it had won a $1.6 billion contract to supply South Korea with 36 U.S. Army Apache (AH-64E) helicopters to replace aging fleets with next generation attack helicopters.^[29]

U.S. General Imports

Total U.S. general imports from South Korea increased by 2 percent to $71 billion in 2017. The increase in U.S. imports from South Korea was principally driven by the energy sector ($609 million, 27 percent), the minerals and metals sector ($509 million, 10 percent), and the machinery sector ($828 million, 12 percent). Declining U.S. imports of South Korean chemicals and related products (down $966 million or 11 percent) tempered the overall increase in imports.

The energy sector accounted for 4 percent of total U.S. imports from South Korea in 2017, but represented the largest percent increase in U.S. imports.^[30] The value of energy-related product imports rose by $609 million (27 percent) to $2.9 billion in 2017. Petroleum products accounted for the majority of this increase, primarily in the form of increased imports of petroleum oils such as kerosene-type jet fuel, imports of which increased from $1.6 billion to $2 billion in 2017.^[31] South Korea is the third-largest source of U.S. imports of petroleum oils,^[32] after Russia and Canada.^[33] Part of this increase in U.S. imports, is due to an increase in jet fuel prices, which rose steadily from $0.93 per gallon in January 2016 to $1.51 per gallon in January 2017 (62.4 percent increase).^[34]

The minerals and metals sector accounted for 8 percent of total U.S. imports from South Korea in 2017 and accounted for a large increase in general imports (up by $509 million, or 10 percent).^[35] U.S. imports of minerals and metals from South Korea increased to $5.8 billion in 2017. The U.S. is the world’s leading steel importer, and South Korea was its third-largest supplier in 2017, accounting for 10 percent (or 3.4 million metric tons) of U.S. steel imports.^[36]  Much of the recent increase in imports from South Korea was due to growing domestic demand for two types of products—steel pipes and tubes, which increased by $871 million (139 percent), and other steel mill products, which increased by $439 million (19 percent). South Korea was the largest supplier of pipe and tube imports and the second-largest supplier of flat products.^[37] 

The United States was the largest importer of steel pipe and tube from South Korea in 2017, and according to industry publication, “account[s] for 66% of all South Korean pipe and tube exports."^[38] U.S. oil and gas industry demand for South Korean pipe and tube products was concentrated in imports of welded casings used for oil and gas drilling,^[39] welded line pipe used for oil and gas pipelines,^[40] welded tubing for oil and gas,^[41] and seamless casing pipe for drilling for oil and gas.^[42] Rising domestic demand for these products was partly driven by increased U.S. petroleum and gas drilling activity, which in turn was spurred by rising prices of oil and natural gas in 2017.^[43] South Korean pipe producers have concentrated on line pipe and oil country tubular good pipe products, because other pipe products are already dominated by lower-cost producers such as China.^[44]

A large decrease in U.S. imports of chemical products tempered the overall rise in general imports from South Korea. Chemical sector imports from South Korea declined from $8.5 billion in 2016 to $7.5 billion in 2017. A $1.2 billion decline in medicinal chemicals^[45] between 2016 and 2017 accounted for a large portion of this decline. In 2017, over 90 percent of all U.S. imports of medicinal chemicals from South Korea were composed of antisera and immunological products, including biotechnology products.^[46] U.S. imports of these immunological products from South Korea had increased sharply from 2013 to 2016, rising from less than $2 million in 2013 to $2.4 billion in 2016. The South Korean government’s long-term investment in developing a domestic biopharmaceutical industry has supported the growth of the medical chemicals market, which is expected to reach $24.3 billion by 2020.^[47] In 2015, Samsung announced plans to build additional biologics manufacturing plants to support South Korean biologics.^[48] South Korea has also attracted significant foreign investment in this domain. Multinational biopharmaceutical companies such as Pfizer, AstraZeneca, Bristol-Myers Squibb, Sanofi, and Novartis have all invested in South Korean pharmaceutical research and development.^[49] 

In 2017, however, U.S. imports of total medicinal chemicals from South Korea declined, falling by $1.2 billion (48 percent), driven largely by declining imports of immunological products. This decline in U.S. imports of immunological products from South Korea is in contrast to the overall increase in U.S. imports of immunological products from other suppliers. Total U.S. global imports of immunological products increased from $13.5 billion in 2016 to $18 billion in 2017. Imports of immunological products from Ireland alone grew by $3 billion (or 131 percent) between 2016 and 2017.  The U.S. market accounts for almost half of the worldwide biopharmaceuticals market and trade flows of these high-value products are affected by the international nature of pharmaceutical supply chains.^[50] The increase in U.S. imports from Ireland and other European suppliers may be due in part to multinational firms using facilities in these countries to meet U.S. demand.

U.S. Merchandise Trade Balance

The U.S. trade deficit with South Korea declined by $4.7 billion (17 percent) between 2016 and 2017, as total U.S. exports to South Korea increased by $6 billion (14 percent) and total U.S imports from South Korea only rose by $1.3 billion (2 percent). The declining trade deficit resulted from increased U.S. exports across many sectors, including machinery, energy-related products, electronics, and agriculture.^[51] At the same time, U.S. imports from South Korea in machinery, steel products, and energy products increased only more moderately, and these increases were tempered by declining U.S. imports of chemicals from South Korea.

 

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