South Korea’s exports in August fell short of expectations due to U.S. tariffs on shipments. Overall, exports increased by 1.3% from last year, reaching $58.4 billion. However, this was lower than the expected 3.0% growth and a slowdown from July’s 5.9% rise. Shipments to the U.S. dropped by 12%, marking the largest decline since May 2020, as tariffs increased from 10% to 15%. The most impacted items included cars, machinery, and steel. In contrast, products like semiconductors and telecom equipment, which are not subject to tariffs, saw increases.

Regional Export Trends

Exports to China fell by 2.9%, while shipments to Southeast Asia rose by 11.9%, and exports to Taiwan skyrocketed by 39.3% due to high demand for chips. By category, semiconductor exports jumped 27.1%, automobiles grew by 8.6%, and ship exports saw an 11.8% rise. On the downside, energy-related exports dropped, with petroleum down 4.7% and petrochemicals down 18.7%. Imports fell by 4.0% year-on-year to $51.9 billion, which was a larger decline than forecasted. This resulted in a trade surplus of $6.5 billion, slightly down from July’s $6.6 billion. The slowdown in South Korean exports, caused by U.S. tariffs, presents a pessimistic outlook for the won. After the August data release, the currency weakened past the key level of 1,400 per dollar. Traders may want to explore options strategies that can benefit from further depreciation of the KRW against the dollar in the coming weeks. The uncertainty around future U.S. trade policies is likely to increase market volatility. The KOSPI index fell by 2.5% in the last week of August, and with no scheduled high-level trade talks between Washington and Seoul in September, buying volatility through options on the KOSPI could be a smart strategy. This situation generates unpredictability, which volatility traders seek.

Trading Opportunities

The data highlights a clear split: semiconductor exports rose 27.1%, while sectors affected by tariffs struggled. Global demand for high-end chips remains strong, with industry forecasts for Q4 2025 predicting 15% year-over-year growth due to the rise of AI data centers. This strength makes call options on major chipmakers appealing. On the other hand, the 12% drop in shipments to the U.S. mainly impacts the automotive and steel sectors. This situation is similar to the trade disputes of 2018-2019, which negatively affected industrial stocks for multiple quarters. Traders might find opportunities to buy put options on vulnerable automakers and steel manufacturers. Additionally, there is a noticeable shift in trade flows, with exports to Southeast Asia and Taiwan growing significantly by 11.9% and 39.3%, respectively. This trend suggests that a regional pairs trading strategy could work well. One could invest in Taiwanese tech indices while minimizing exposure to the broader South Korean market to avoid the impacts of tariffs. Create your live VT Markets account and start trading now.

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