The Korean economy is likely to be hit hard as its two biggest trading partners are on the brink of a trade war following threats to slap each other with hefty tariffs over the weekend.
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(Yonhap) |
On Friday, the Trump administration announced it would impose 25 percent tariffs on the Chinese goods worth $50 billion in an effort to protect the US intellectual property and technology.
A day later, China responded to the US by announcing 25 percent tariffs on a $34 billion list of the US goods in the areas of agricultural products, automobiles and marine products.
With the escalation of trade disputes between the world’s two largest economies, concerns are growing in Korea that the trade war may ripple through the export-led Korean economy.
“(If the tariffs are slapped), Korean intermediary goods -- especially electronics, machine and steels -- destined for the US via China will be hit hard,” said Joo Won, a chief of Hyundai Research Institute’s economic research division.
“Falling exports may act unfavorably toward the national economy amid weakening consumption,” he added.
If the 25 percent tariffs are imposed on products from China worth $50 billion, the US imports from China will be reduced by 10 percent annually and Korea’s exports to China will accordingly fall by up to $28.2 billion, according to the Hyundai Research Institute.
The reduction amounts to 19.9 percent of Korea’s total export to China and 4.9 percent of the nation’s total exports to the global market last year.
Experts say the confrontation between the two nations is expected to last a while as China would not back off easily.
“China will not back off from the US pressure as it already saw the outcome of the trade conflict between the US and Japan over technology hegemony in the past,” said Park Jin-woo, chief of the Korea International Trade Association’s trade support division.
Japan’s “lost decades” are believed by some to have started with the trade war with the US.
On Saturday, China’s state-run press agency Xinhua News Agency issued a commentary, saying, that China “hates” to be engaged in a trade war with the US, calling it a “lose-lose” situation.
The commentary continued: “But, this does not mean Beijing is going to sit quietly in the face of Washington’s planned unilateral tariffs. China has to fight back forcefully so as to safeguard the interests of the nation and its people.”
The Korean government is also closely monitoring the trade action with related companies.
“Given the possibility of spreading a trade war, we will monitor and map out countermeasures jointly with related ministries and the private sector,” said Deputy Minister for Trade Kang Sung-chun.
By Shin Ji-hye (
shinjh@heraldcorp.com)
