KEF: South Korea's Manufacturing Sector Has Highest Dependence on US and China Among Major Countries

Highest Overseas Demand Dependence in Manufacturing Among Major Economies
U.S. and China Account for Nearly a Quarter of Sector's GDP
Rising Vulnerability Amid Global Trade Uncertainty
Electrical Equipment Sector Shows Especially High Foreign Reliance
Experts Urge Stronger Government Support to Bolster Competitiveness

South Korea's manufacturing sector has the highest dependence on the United States and China among major countries, raising concerns that changes in the global trade environment could undermine its manufacturing competitiveness.

On May 21, the Korea Employers Federation (KEF) highlighted this issue in its report titled "Current Status and Implications of Domestic and Overseas Demand Dependence in Korean Manufacturing." According to the report, the dependence of South Korea's manufacturing GDP on overseas demand reached 58.4% in 2023, up from 52.7% in 2000.

South Korea's manufacturing sector shows the highest level of overseas dependence among major competitors such as the United States, China, and Japan. In contrast, the United States, China, and Japan all have a higher reliance on their domestic markets than on overseas demand in their manufacturing sectors.

When examining South Korea's manufacturing demand dependence by country, the United States accounted for the largest share at 13.7%, followed by China at 10.8% and Japan at 2.6%. However, compared to 2000, the dependence of South Korea's manufacturing GDP on U.S. demand decreased (from 14.8% to 13.7%), while dependence on Chinese demand more than doubled (from 4.8% to 10.8%) by 2023.

Notably, the combined dependence on U.S. and Chinese demand for South Korea's manufacturing GDP stood at 24.5%, higher than that of major manufacturing competitors such as Japan (17.5%) and Germany (15.8%). A KEF official stated, "If trade tensions between the U.S. and China intensify and economic activity in both countries contracts, South Korea's manufacturing sector could experience greater disruptions to production than other competitors."

The "electrical equipment sector," which includes semiconductors and represents South Korea's manufacturing industry, had an overseas demand dependence of 76.7% in 2023, up 8.5 percentage points from 68.2% in 2000. In 2023, the dependence of South Korea's electrical equipment sector GDP on U.S. and Chinese demand (37.5%) was second only to Taiwan (53.1%) among major countries. The electrical equipment sector includes semiconductors, displays, computers, and electric vehicle batteries.

Ha Sangwoo, head of the KEF Economic Research Division, emphasized, "Recently, due to U.S. tariff policies and the worsening global trade environment, the challenges facing our manufacturing sector?especially given its high dependence on overseas demand, particularly from the U.S. and China?are increasing." He added, "Without a strong manufacturing base, there can be no new leap forward for our economy, so it is urgent for the government and the political sector to provide active support to enhance manufacturing competitiveness."

This content was produced with the assistance of AI translation services.