Seoul: South Korea’s exports in September reached their highest level in three and a half years, yet domestic consumption in August fell to its lowest point in over a year.

According to Yonhap News Agency, outbound shipments in September soared by 12.7 percent year-on-year to $65.9 billion, marking the highest September tally ever recorded. However, the daily average slipped by more than 6 percent, with four more working days than last year.

The surge in exports was largely driven by semiconductors, with memory chip prices pushing shipments to a record $16.6 billion, up 22 percent from the previous year. Cars also performed well, despite a shrinking US market. However, excluding chips and automobiles, the export outlook appears weaker, highlighting the fragility of South Korea’s export portfolio.

External challenges are mounting as exports to the US fell by 1.4 percent, with significant declines in steel and automobile shipments. US tariffs have increased trade costs, with steel and aluminum facing a punitive 50 percent tariff and Korean cars burdened by a 25 percent tariff, higher than those applied to Japanese and European models. This has resulted in a decline in auto shipments to the US, placing South Korea in a difficult position between defending multilateral norms and cutting bilateral deals for market access.

Domestically, consumers are tightening their belts, as retail sales fell 2.4 percent in August, the steepest decline in eighteen months. This reversal followed a temporary boost in July from government-issued consumption vouchers, which briefly lifted spending. The government plans to issue a second round of vouchers, but the economic logic of this fiscal activism remains questionable. The IMF has cautioned Seoul against fiscal policies that lack credible rules, given South Korea’s non-reserve currency economy and rapidly aging population.

The broader concern is whether these mixed signals-strong exports alongside weakening fundamentals-indicate a longer economic downturn. The risks include heavy reliance on semiconductors, fragile domestic demand, and increasing tariffs, compounded by concerns about an aging society limiting fiscal flexibility. While the latest trade surplus of $5.6 billion is welcome, it does not signify durable growth.

For the government, the priority should be developing a credible strategy for managing trade risks, reforming key sectors, and revitalizing private investment. For companies, the focus should be on diversifying markets away from US protectionism, targeting ASEAN, the Middle East, and Latin America, while enhancing competitiveness in sectors beyond semiconductors. Without strategic action, South Korea risks mistaking temporary gains for lasting strength, as highlighted by last month’s figures.