Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Trump's tariff plan creates increased urgency for Korea to accelerate decoupling from China
Korea seems to have a growing need to rapidly reduce its trade dependence on China, especially in light of Donald Trump's return to the presidency.
Trump wants to impose a 10 percent or 20 percent tariff on all imports and a specifically higher rate of 60 percent to 100 percent on goods brought in from China.
Containers are stacked and ready to be shipped at Busan Port, Nov. 1. Yonhap
By Yi Whan-woo
These tariff plans come as Seoul pushes to decouple from Beijing in terms of trade, despite China accounting for about a quarter of Korea's total exports during the peak of their economic partnership.
According to the Korea International Trade Association, 78.4 percent of Korea's exports to China were intermediary goods in 2023.
Intermediary goods are goods that are used to make finished products that are sold abroad, including the U.S.
"Under the circumstances, a high U.S. tariff on Chinese products may affect Korea's sales of intermediary goods to China one way or another," a Korea Economic Research Institute economist said on condition of anonymity, noting insufficient data to back up his assertion.
Hanyang University economics professor Ha Joong-kyung said that an accelerated decoupling from China will be crucial as the U.S.-China trade war is likely to intensify under a second Trump presidency.
The professor noted that Washington's push to secure technological dominance with its allies has been posing a challenge for Korea as its supply chain network is closely linked with China.
"Korea may be pressed further to choose a side between the U.S. and China as Trump begins his term next year, and taking an ambiguous and obscure stance may jeopardize Korea's position," the professor explained.
On condition of anonymity, a Kyung Hee University economics professor said, "gradually keeping distance with China on trade makes sense" as Beijing's weaponization of trade can occur again.
He pointed out that Korea's trade was negatively affected by the deployment of the U.S. THAAD missile defense system in the 2010s.
"The U.S-China clash is likely to spread across trade, diplomacy and other areas, and you don't want to risk your trade as China's way of retaliating," the professor said.
The professor deemed a direct investment in the U.S. may be a smart option to grapple with Trump's high tariff plans.
"The plan will incentivize international companies to build manufacturing plants in the country," he said.
While outgoing U.S. President Joe Biden drew massive foreign investment into the U.S., the professor believes Trump will attract even more, considering corporate taxes are going to be lower under the Trump administration.