THAAD row costs Korea up to $20 bil.: report

By Nam Hyun-woo

Korean companies will suffer $20 billion economic damages if Korea and China relations worsen due to Korea’s deployment of a U.S. Terminal High Altitude Area Defense (THAAD) system, a think tank estimated.

In its report released Tuesday, Korea Development Bank (KDB) Research calculated the amount of economic fallout of China’s THAAD retaliation on two assumptions: that China imposes additional economic sanctions and that anti-Korean sentiment spreads in the communist country. Then, it predicted Korean manufacturers’ exports volume will likely decrease by 6.7 percent or $8.3 billion from that of last year.

Also, the report estimated that Korea’s duty free and tourism industries, whose main customers are Chinese, will likely see an 80 percent or $11.7 billion year-on-year decrease in its sales this year.

Broken down by industry, the report projected the tourism sector will be hit hardest if China enhances its THAAD retaliation, with sales decreasing by $6.39 billion from 2016 followed by duty free shops losing $5.35 billion and the cosmetics segments with $1.44 billion.

In particular, exports of the cosmetics, duty free and tourism sectors are expected to go down by at least 15 percent under the worst-case scenario.

In case China’s tantrum remains at the current level, the report anticipated the exports volume of the manufacturing sector will decrease by 2.1 percent or $2.6 billion from last year. The duty free and tourism sectors are expected to see their sales decrease by 50 percent this year.

On the other hand, the report said the impacts to the semiconductor, display, shipbuilding and construction sectors will be limited because Korean companies in those businesses are either dominant global players or do not get orders from China.