Avoiding the falloutThe United States and China are teetering on the brink of a trade war. Beijing has started to impose 15 percent to 25 percent tariffs on 128 types of U.S. imports, including pork and fruit, from Monday to retaliate for U.S. President Donald Trump’s executive order levying 25 percent tariffs on Chinese steel and 10 percent tariffs on aluminum from March based on the 1962 Trade Expansion Act, which allows a U.S. president to impose tariffs on imports for security reasons.
After the Trump administration warned that it would levy a high level of tariffs on Chinese imports worth up to $60 billion down the road, China made clear its intention to take retaliatory action. Some trade experts say there is a possibility of both sides striking a deal under the table before their trade disputes reach a climax. But others worry the trade friction will be exacerbated ahead of the November midterm elections in the United States. Despite most analysts warning that a trade war between the two largest economies will most likely backfire on both sides, Washington and Beijing exude an air of nonchalance.
China and the United States are South Korea’s largest and second largest trading partners respectively. If the China-U.S. trade conflict escalates into a full-blown war, our economy cannot help but be affected. That will critically affect our exports of intermediary goods to China. Our government must prevent potential behind-the-scenes negotiations between Washington and Beijing from wreaking havoc on our economy. Foreign media outlets have already reported that China is considering the idea of importing more U.S. semiconductor chips than Korean chips.
The Moon Jae-in administration must pay extra heed to the possibility of the China-U.S. trade discord triggering unwanted fallout on our diplomatic and security fronts — in particular, the Trump administration’s attempt to use trade issues as leverage in dealing with security issues, including the North Korean nuclear problem. South Korea has already suffered huge economic losses from China’s retaliation for our deployment of the Terminal High Altitude Area Defense (Thaad) anti-missile system.
After the Moon administration relatively smoothly wrapped up a renegotiation of the Korea-U.S. Free Trade Agreement and China promised to stop retaliations for the Thaad deployment, our economy appeared to be getting a boost. But now it has to confront a wave of trade protectionism. For our part, there is no other way but to boost domestic demand and diversify our markets overseas.
JoongAng Ilbo, April 3, Page 30