South Korea’s exports posted their biggest fall in three-and-a-half years in June, data showed on Monday, denting government hopes for a pick-up in economic growth after a shocking decline in the first quarter.

Exports by Asia’s fourth-largest economy plunged 13.5% in June from a year earlier, the trade ministry data showed, more than the 12.0% decline tipped in a Reuters poll and the fastest fall since January 2016.

The data is the first batch of trade figures released by a major exporting economy since US and Chinese leaders agreed over the weekend to restart their trade talks, which analysts say provided some relief for financial markets but is not expected to boost global trade.

“The outcome of the G20 (events) was better than expected, but that is somehow a political show, and what matters to the (local) economy is eventually the semiconductor sector,” said Oh Chang-sob, an economist at Korea Investment & Securities.

A plunge in the prices of memory chips amid a cooling global economy has hurt South Korean exports as semiconductor products account for 20.9% of the country’s total exports last year.

Exports in the second quarter fell 8.4% from a year earlier after an 8.5% drop in the first quarter, dashing the government’s expectations that the economy would rebound from a 0.4% decline in the first quarter.

A manufacturing survey from IHS Markit on Monday also showed South Korea’s factory activity shrank at the fastest pace in four months in June while export orders dropped for an 11th consecutive month.

The deputy head of the country’s central bank also shrugged off the China-U.S. agreement to resume talks, saying it was “positive for the short-term but uncertainty is high for the medium- to long-term.”

Local financial markets have also showed a cautious response to the combination of events over the weekend, as investors were reluctant to change their bets that the Bank of Korea would eventually have to lower interest rates in the coming months.

“The Bank of Korea will likely cut rates in August and also trim its annual growth forecast,” said Park Sung-woo, an analyst at DB Financial Investment.

The finance ministry is due to announce its updated policy goals and growth forecasts later this week.

The BOK held the policy interest rates unchanged at 1.75% in its May meeting, but a majority of economists are now seeing the central bank cutting rates between July and August, in what would be the first easing in three years.

The central bank is due to review its policy on July 18.

Meanwhile, Japan will tighten curbs on exports of high-tech materials used in smartphone displays and chips to South Korea amid a growing dispute over South Koreans forced to work for Japanese firms during World War Two, the industry ministry said on Monday.

Tighter export controls, effective from July 4, would slow the export process by several months, hitting South Korean tech giants, such as Samsung Electronics and SK Hynix .

The step comes amid Tokyo’s growing frustration at what it calls a lack of action by Seoul over issues stemming from its top court ruling last October that ordered Nippon Steel to compensate former forced labourers.

South Korea’s deputy minister for trade said Japan’s curbs would violate World Trade Organization rules and Seoul would respond.

“We will firmly respond to this unfair measure by Japan that violates international law,” Park Tae-sung told reporters.

South Korea’s finance minister also called a meeting to discuss plans, officials said. Japan rejected South Korea’s proposal last month to create a joint compensation fund for victims with contributions from both nations’ companies.

“South Korea has failed to show any satisfactory measures to resolve the forced labour issue ... and severely damaged mutual trust,” said an official of the Ministry of Economy, Trade and Industry.

“As trust has been lost, we cannot have a dialogue and are unable to ensure that proper export controls are being taken,” he told a news briefing.

The neighbours share a bitter history dating to the Japanese colonisation of the Korean peninsula from 1910 to 1945, including forced use of labour by Japanese companies and the use of comfort women.

Japan, which says the issue of forced labour was fully settled in 1965 when the two countries restored diplomatic ties, has denounced the rulings and urged the launch of an arbitration panel.

The materials to be restricted are fluorinated polyimides, used in smartphone displays, as well as resist and high-purity hydrogen fluoride (HF), which is used as an etching gas to make semiconductors.

Reuters