Germany’s economy minister is set to embark on a journey to Asia, with South Korea being the first stop on the itinerary. The purpose of this visit is to enhance economic relations with the region’s fourth-largest economy, as Germany looks to reduce its trade exposure to China. Both Germany and South Korea are industrial powerhouses with a strong export focus, and they are eager to expand their network of commercial partners in light of trade challenges posed by China and the United States.
During his mission to South Korea, Economy Minister Robert Habeck aims to deepen cooperation in various areas such as business, economic security, and climate. The economic ties between South Korea and Germany are well-established, with Germany’s direct investment in South Korea amounting to 15.1 billion euros in 2022. The two countries have a significant trade volume, totaling 34 billion euros last year. German exports to South Korea amounted to 20 billion euros, making it the third-largest non-EU export destination for Germany.
The trade between Germany and South Korea is dominated by sectors such as automotive, chemical, and pharmaceutical. German exports to South Korea mainly consist of cars and automotive parts, which account for a large portion of goods sold to the country. Both countries compete in various sectors, such as the automotive industry, while also collaborating on research and development in areas like e-mobility and hydrogen. South Korean companies excel in areas like semiconductors and batteries, while German firms provide inputs within the supply chain for their products.
German automotive supplier Continental has been operating in South Korea since 1986, with seven locations and 1,300 employees in the country. South Korea is a significant part of Continental’s diversification strategy in the region, alongside its presence in China. By having a network of production locations in Asia, companies like Continental reduce their dependence on any single market. This strategy allows them to mitigate risks associated with geopolitical tensions and changes in trade policies.
Strategic Importance of South Korea
South Korea’s geographical proximity to China has led to close trade ties with the second-largest economy in the world. However, tensions between Beijing and Washington have pushed South Korea to balance its trade relations carefully. The country has introduced a 10-point plan for industrial supply chains to reduce dependencies on critical products. This strategic approach indicates South Korea’s commitment to diversifying its trade partners and minimizing risks associated with external pressures.
Germany’s visit to South Korea marks a crucial step in strengthening economic ties between the two countries. As both nations navigate through the complexities of global trade dynamics, collaboration and mutual investment play a vital role in ensuring sustainable economic growth. By fostering cooperation in key sectors and exploring new opportunities, Germany and South Korea can further enhance their trade relations and solidify their positions as key players in the global economy.