South Korea Caught in the Middle of US-China Trade War Tensions

Strategic Insights -

As the United States and China intensify their trade war, South Korea is facing a difficult decision, forced to choose between its long-standing alliance with America and its economic dependence on China. The country's new president, Lee Jae Myung, has acknowledged that it is no longer possible to maintain its traditional policy of neutrality between the two superpowers, and is struggling to meet President Trump's demands to complete a trade deal.

Key Takeaways:

  • South Korea has been thrust into the middle of the US-China trade war, forced to navigate export controls, sanctions, and tariffs.
  • The country's new president, Lee Jae Myung, has acknowledged that it is no longer possible to maintain its traditional policy of neutrality between the US and China.
  • South Korea is struggling to meet President Trump's demands to complete a trade deal, including investing $350 billion in the US and spending $100 billion on liquefied natural gas.
  • The US has not lowered tariffs on South Korean goods as agreed, and Seoul has balked at demands for cash investments, citing concerns about currency volatility.
  • South Korea's semiconductor industry has become a pawn in the escalating feud between China and the US, with Chinese chip makers receiving financial backing from Beijing to close the technological gap with overseas firms.
  • The years of catching up between Chinese firms and South Korean semiconductor manufacturers like SK Hynix and Samsung Electronics may be shorter than anticipated, posing potential long-term dangers for South Korea's industry.

Statistics:

  • $350 billion: the amount of investment South Korea agreed to make in the US under the preliminary trade deal.
  • $100 billion: the amount of investment South Korea agreed to spend on liquefied natural gas under the trade deal.
  • 15%: the tariff rate on South Korean goods agreed to by President Trump, down from 25% initially announced.
  • 55%: the share of South Korea's exports going to China, the country's largest trading partner.
  • 5: the number of US subsidiaries of the South Korean shipbuilder Hanwha Ocean hit with sanctions by China this month.

Sources:

  • Andrew Yeo, a senior fellow and the Korea chair at the Brookings Institution's Center for East Asia Policy Studies
  • Yang Sang-hoon, opinion columnist for Chosun Ilbo, South Korea's conservative daily newspaper
  • June Park, political economist from South Korea
  • The Wall Street Journal
  • The New York Times