The ongoing trade war between the United States and China is likely to have a significant impact on the South Korean economy and its exports to China.
According to industry sources, the United States is planning to impose 25% tariffs on Chinese products worth US$34 billion starting from July 6 before making a decision on additional tariffs on Chinese products worth US$16 billion. This is likely to result in a sharp increase in the prices of aerospace products, IT devices, robots, new material products, automobiles and the like imported from China. The U.S. has pledged to impose additional tariffs if China retaliates.
China is not sitting idle. The Chinese government announced that it would levy 25% tariffs, starting from July 6, on U.S. products worth US$34 billion, including agricultural and fisheries products and automobiles. In addition, it is going to make an additional announcement regarding chemical, medical and energy products worth US$16 billion.
According to the Hyundai Research Institute, 25% U.S. tariffs on Chinese products worth US$50 billion, which account for 10% of U.S. imports from China, and a resultant 10% decline in U.S. imports from China, are estimated to reduce South Korea’s exports to China by US$28.26 billion. For reference, South Korea’s exports to China totaled US$142.12 billion last year, accounting for about 25% of South Korea’s total exports.
The WTO recently announced that South Korea posted the highest export growth rate among the 10 largest exporting countries in the world last year but its ranking fell to eighth in the first quarter of this year. Besides, South Korea fell from sixth to seventh during the same period in terms of total exports. For the first 10 days of this month, South Korea’s exports totaled US$12.4 billion, up just 2.0% from a year ago.