Here comes the end of ‘the end of history’

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Here comes the end of ‘the end of history’

In his landmark 1992 book “The End of History and the Last Man,” Stanford University Prof. Francis Fukuyama declared the end of the Cold War heralded a victory for the liberal democratic and market economy forms of governments over other political and economic systems. The spread of free trade enabling divisive roles fueled not only economic growth but also interdependence among countries, working as a lynchpin for global peace and stability.

But the rise of protectionism and nationalism is challenging these principles that once anchored the global order. Morgan Stanley CEO Ted Pick said the world is back to the days before the “The End of History” as geopolitical tensions are as high as back then and will likely to perpetuate for decades. Instead, what has ended is the era of financial repression, zero interest rates and zero inflation. Given the geopolitical tensions on top of the heightening U.S.-China conflict, inflationary pressure will remain high to constrain pivoting to monetary loosening.

Trade barriers are going up by the day. The European Union in finalized countervailing duties slapped as high as 45.3 percent levies on imports of Chinese EV imports to the 27-nation bloc starting Thursday for the next five years. Chinese car brands were levied with punitive duties of between 7.8 percent and 35.3 percent on top of the current base rate of 10 percent. The move comes after Chinese EV inroads into the region jumped from 3.9 percent in 2020 to 25 percent by September 2023 thanks to their price competitiveness from generous government subsidies and battery localization. The U.S. government also earlier this week finalized rules that will limit U.S. capital investment in Chinese high-tech sectors — semiconductors, microelectronics, quantum information and AI systems, citing potential threat to national security.

The shaking of free trade that sustains market economy as the result of trade protectionism and nationalism can pose a serious threat to small economies like Korea relying on exports and trade. The global chip supply chain has already been rattled by a U.S.-led realignment pitted against China. China’s share in Korea’s memory chip exports fell below 40 percent for the first time in 12 years in the January-September period. Whether Korean carmakers can benefit from the high tariffs on Chinese EVs in Europe is uncertain. Republican candidate Donald Trump is vowing to scrap subsidies for foreign chipmakers building facilities in the country and slap tariffs as high as 60 percent on Chinese imports.

To avoid being caught in the crossfires of a trade war, Korea needs to come up with a long-term strategy to defend its goods in the new trade order and explore new markets. The best weaponry in a trade war is unrivalled manufacturing and technology supremacy. Corporate endeavors in R&D, government support and legislative backing must all move as one. We could be swept away if we let down our guard in the jungle-like trade environment.
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