SEOUL (KOREA HERALD/ASIA NEWS NETWORK) - South Korea is bracing for the impact of the opening blows in the United States' trade war with China, while playing down the possibilities of immediate setbacks.
Starting on Friday (July 6) at 1pm South Korean time (12pm Singapore time), the US implemented 25 per cent tariffs on US$34 billion (S$46 billion) of Chinese trade. Immediately after the move, China vowed swift retaliation, calling the tariffs "typical trade bullying".
Prior to the US-China tit-for-tat, Asia's fourth-largest economy at 8.15am, held a pan-governmental meeting. Led by the Ministry of Strategy and Finance, government officials pledge a close coordination between ministries and other state-run organisations, as well as 24-hour monitoring of financial market volatilities and macroeconomic activities.
"A sprawling impact from global trade conflicts including US-China trade war could weigh on Korea as a downward risk in Korean exports and the global economy," read a statement by the Ministry of Strategy and Finance. "Moreover, (Korea) is concerned about widening volatilities in global financial market."
In another meeting held at 10.30am, Trade Minister Paik Un-gyu vowed to keep tabs on uncertainties that the export-driven nation is facing and to minimise impacts on the economy and businesses. South Korea's total exports in the first half of this year came to US$297.5 billion, up 6.6 per cent on-year.
South Korea has also recorded an annual trade surplus every year - except for 2000 and 2008 - since data became available in 2000, according to data by the Korea Customs Service.
Mr Paik added the US-China trade war would have "a limited impact on Korean exports in the short run". But he called on South Korea's industry associations, as well as the Korea International Trade Association and the Korea Trade-Investment Promotion Agency, to explore new destinations for exports in a bid to brace for lingering impact of the trade conflict.
While South Korean companies exporting to China and the United States mainly target domestic markets, according to the Kotra Friday, some South Korean companies are part of a global supply chain involving China and the US.
Experts said such companies were likely to be the most immediate victims from the US-China trade war.
"Korean raw material suppliers and parts makers exporting to China or the US will be the most likely victims, if their exporting goods are on the tariff list," Joo Won, director at Hyundai Research Institute, told The Korea Herald.
"Moreover, Korean exports of capital goods like factory machines, trucks and forklifts would also take heat, which are not counted as part of the global supply chain."
In a June report, given US tariffs were imposed on US$50 billion of Chinese products, Hyundai Research Institute projected a drop in South Korean exports to China by US$28.3 billion a year, based on a projection of a 10 per cent drop in China's exports to the US.
Stock markets in South Korea, hitting the lowest in 2018 earlier this week due to trade war threats, have rebounded since 1pm on Friday. The top-tier Kospi and the second-tier Kosdaq ended 0.7 per cent and 1.9 per cent higher, respectively.