Current Account Surplus with U.S. Decreases for First Time in Six Years: "Tariff Impact and Higher Intellectual Property Payments"

Record Current Account Surplus Last Year ($123.05 Billion), Regional Breakdown

Current Account Surplus with the U.S. Declines for the First Time in Six Years

Exports of Major Tariff Items Such as Automobiles Turn Negative

Services Account Deficit Widens Significantly Due to Higher Payments for Intellectual Property Rights and Other Services

Current Account Balance with China Remains in Deficit for Four Consecutive Years Since Turning Negative in 2022

The size of South Korea's current account surplus with the United States, which had been rising since 2020, decreased for the first time in six years. The current account balance with China has also been in deficit for four consecutive years since turning negative in 2022.

According to the "2025 Regional Balance of Payments (provisional)" released by the Bank of Korea on June 19, last year's current account recorded a surplus of 123.05 billion dollars, setting a new all-time high following the previous year's 99.97 billion dollars. Broken down by region, the current account surplus with the United States was 111.42 billion dollars, a decrease from the previous year's 116.97 billion dollars. This was due to an expanded goods surplus resulting from increased exports of semiconductors and information and communication devices, but at the same time, the deficit in the services account grew due to higher payments for intellectual property rights and other services.

Park Seong-gon, Head of the International Balance of Payments Team at the Economic Statistics Department 1 of the Bank of Korea, explained, "Although exports of IT items such as semiconductors and smartphones to the U.S. remained strong, the decrease in exports of major tariff items such as automobiles and general machinery since last year, along with increased payments for intellectual property rights and travel, significantly widened the services account deficit, resulting in a reduced current account surplus with the United States."

The current account balance with China recorded a deficit of 25.32 billion dollars, with the deficit widening compared to the previous year's 23.45 billion dollars. While the primary income account surplus expanded due to an increase in dividend income, the goods account deficit worsened as exports of chemical products and steel products declined. Park noted that the continued deficit in the current account with China is due to, independently, China's increasing self-sufficiency in intermediate goods, and also the decline in China's domestic demand and economic growth, leading to a persistent decrease in exports of chemical products, steel products, and smartphone components. Meanwhile, imports of Chinese automobiles, home appliances, and IT devices into South Korea continue to rise steadily.

The current account balance with Japan posted a deficit of 20.3 billion dollars, up from the previous year's 17.97 billion dollars. This was due to a decrease in exports of petroleum products and an increase in imports of semiconductor manufacturing equipment in the goods account, while the services account deficit expanded as travel payments surged due to a record number of Korean travelers visiting Japan.

The current account surplus with the European Union (EU) expanded to 24.42 billion dollars from 22.22 billion dollars in the previous year. This was driven by an increase in the goods account surplus due to higher exports of semiconductors and passenger cars, and by an expanded primary income account surplus due to decreased dividend payments.

The current account surplus with Southeast Asia also widened to 71.84 billion dollars from 63.44 billion dollars in the previous year. Not only did the goods account surplus expand thanks to increased exports of semiconductors, but last year also saw a significant rise in inbound travelers from Southeast Asia, particularly Taiwan, leading to higher travel income and increased revenue from other business services, turning the services account into surplus.

The current account balance with the Middle East showed a deficit of 49.75 billion dollars, but the deficit narrowed from the previous year's 67.96 billion dollars. This was due to a smaller goods account deficit as imports of crude oil, gas, and other energy products decreased amid falling international oil prices last year. The current account surplus with Central and South America expanded to 7.41 billion dollars from 2.03 billion dollars a year earlier.

Last year, South Korean residents’ overseas direct investment (assets) amounted to 41.23 billion dollars, slowing from 49.73 billion dollars in the previous year. Investments in the EU and Japan increased, but investments in China continued to decline, and investments in the United States and Southeast Asia were also reduced. Foreigners’ direct investment in South Korea (liabilities) increased to 15.8 billion dollars from 12.86 billion dollars a year earlier. Park commented, "In particular, investment by U.S. big tech companies in building AI data centers in Korea had some impact last year."

Last year, South Korean residents’ overseas portfolio investment (assets) surged to 140.28 billion dollars from 66.97 billion dollars in the previous year. This was the result of net purchases of overseas equities, led by U.S. tech stocks, expanding by about 2.7 times compared to the previous year. Overseas equity investments rose from 42.16 billion dollars in the previous year to 114.35 billion dollars last year. Overseas bond investments increased to 25.93 billion dollars last year from 24.82 billion dollars, driven by increased investments in the United States and Japan.

Foreigners’ portfolio investment in South Korea (liabilities) also surged to 52.54 billion dollars from 21.36 billion dollars in the previous year. This was the result of inflows of funds into domestic bonds, mainly from the EU and Southeast Asia, expanding by about three times year-on-year as access for foreign investors improved. Domestic equity investments shifted from 2.39 billion dollars in the previous year to a decrease of 5.75 billion dollars last year. This was because investments from Southeast Asia fell significantly, and investments from other regions also shifted to declines. Domestic bond investments (from 18.98 billion dollars to 58.3 billion dollars) increased substantially, primarily due to higher investments from the EU, Southeast Asia, and other regions.

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