South Korea's export growth maintained strong momentum in early March, indicating resilient demand despite soaring energy prices, heightened trade uncertainties, and a gloomy global economic outlook. Data released by Korean customs on Monday showed that exports for the first 20 days of March increased by 40.4% year-on-year after adjusting for working-day differences. This compares to a revised growth rate of 28.7% for February. On a non-adjusted basis, exports rose by 50.4%, while imports grew by 19.7%, resulting in a trade surplus of $12.1 billion.

Semiconductors continued to drive the overall expansion of South Korea's exports, supported by sustained investment in artificial intelligence and data centers. Other sectors, including automobiles, petroleum products, and steel, also recorded growth. Chip exports surged by nearly 164%, auto exports increased by 11%, and shipments of petroleum products rose by 49%.

However, risks to the outlook have intensified. Global crude oil prices have surged due to conflict involving Iran, raising raw material costs, while deteriorating shipping conditions and broader supply disruptions are putting pressure on trade flows. South Korea, which relies heavily on energy and commodity imports, is particularly vulnerable to these effects.

Prior to the escalation of conflict with Iran in February, the Bank of Korea indicated that exports were likely to maintain an upward trend, supported by robust semiconductor demand, while policymakers remain vigilant regarding risks from currency fluctuations, housing prices, and geopolitical tensions.

Citi economist Jin-Wook Kim noted in a report last week that rising oil prices could lead the Bank of Korea to adopt a "more hawkish policy." He projected that the central bank would raise interest rates by 25 basis points each in July and October, bringing the policy rate close to 3%. Earlier, Bank of Korea board member Lee Soohyung suggested that the bank's February forecasts should be adjusted due to upside risks to inflation and downside pressures on growth.

The term of Bank of Korea Governor Lee Chang-yong concludes next month, with a new governor expected to take office. Earlier this month, South Korea's National Assembly approved a special bill to implement the country's commitment to invest $350 billion in the United States. The legislation allows for the establishment of a new state-run agency to oversee investment projects related to last year's trade agreement between South Korea and the U.S.

Trade uncertainty remains elevated after the U.S. Supreme Court rejected tariffs imposed by former President Trump under emergency powers, prompting efforts to maintain a general 15% tariff rate and investigate Section 301 of the Trade Act, which allows tariffs on countries deemed to engage in unfair trade practices.

In response to U.S. investigations into countries with large trade surpluses, South Korean Finance Minister Koo Yun-cheol stated that he expects the current tariff arrangement with the U.S. to remain largely unchanged. He added that the government will continue consultations with U.S. officials regarding possible Section 301 measures while striving to avoid unfavorable revisions.

By destination, exports to China increased by 69%, shipments to the United States grew by 57.8%, and exports to the European Union rose by 6.6%.