The Donald Trump administration raised tariffs on Chinese goods worth US$200 billion from 10 percent to 25 percent on May 10 (local time) and the measure is likely to lead to a decline of US$870 million in South Korea’s exports. Semiconductors, steel products and chemical products exported from South Korea to China are likely to take a direct hit in particular.
The Institute for International Trade of the Korea International Trade Association said in a report on May 12 that South Korea’s exports to the United States and China account for as high as 38.9 percent of its total exports and, as such, the trade disputes between the two countries are predicted to result in more losses in terms of exports with intermediate goods representing 79 percent of South Korea’s exports to China.
“The semiconductor, electrical equipment, steel and chemical sectors, where the proportion of processing trade is higher, are likely to be particularly affected,” the institute explained, adding, “China’s demands for intermediate goods are forecast to decline with its economy slowing down, leading to a decline of 0.14 percent or US$870 million in South Korea’s total exports.”
Market research firm IHS Markit reported that the tariff adjustment will have a limited impact for the time being for China’s economic stimulus policy but China’s economic growth can be hindered once the same 25 percent tariff is additionally imposed on US$300 billion products. “Vietnam, Malaysia and Thailand are likely to benefit from the situation as production bases emerging as alternatives to China,” it mentioned.