In his initial remarks as president, Lee Jae-myung did not make a reference to the new administration's policy towards China. Given the short campaign it is perhaps not surprising that some policies may not be fully defined, but developing a new China policy in the context of the U.S.-China geostrategic rivalry will be one of the key challenges for the new administration.
The default position for much of the last two decades of China being Korea's economic engine and the United States its security partner is no longer viable. The U.S.-China relationship has transitioned from one of economic cooperation to strategic rivalry, which has spilled over into Korea's economic relationship with China and into North Korea policy as well.
While U.S. President Donald Trump himself is largely focused on the trade deficit, during his first administration a bipartisan consensus developed on China. It centered around concerns about Beijing’s use of forced tech transfers, efforts to develop artificial intelligence to advance its military capabilities, the utilization of its burgeoning tech industry to conduct espionage and the growing U.S. dependence on Chinese technology in economic and military sectors.
While Trump could be a wild card and cut a deal with China to ease the rivalry, any agreement, especially one that does not address broader U.S. national security concerns, would likely be an unstable truce at best. The shift to a strategic rivalry between the United States and China will remain a defining feature of international relations for the foreseeable future.
Any Korean policy towards China needs to be designed to manage relations during a period of increasing strategic competition that will reshape Korea’s ability to pursue its interests, just as the early stages of this rivalry have already impacted Korea.
The semiconductor industry is a prominent example of how the U.S. policy toward China has indirectly impacted Korea. Both Samsung and SK hynix have significant investments in memory chip production in China. About 40 percent of Samsung’s NAND flash memory is produced in China, as well as around 40 percent of SK hynix’s DRAM production. U.S. export controls on semiconductor manufacturing equipment would have forced those operations to stop had the former Biden administration not provided Samsung and SK hynix validated end-user status, while the CHIPS Act has placed limits on investments in upgrading those plants.
Korean firms have also been impacted by China’s response to U.S. export controls and tariffs. To counter U.S. moves, China began developing its own regime of export controls, especially for rare earth minerals. New controls were announced on April 4 for seven rare earth minerals and permanent magnets that are critical for the production of electric vehicles (EVs), high-tech products and military equipment. The slowdown in the export of these items, for which China is the dominant producer, has impacted not just U.S. firms but every country. China is likely to use this leverage going forward.
While the U.S.-China relationship has changed, so too has Korea's economic relationship with China. No longer complementary economic partners, Korea and China are now economic competitors and rivals in many industries. China has surpassed Korea as the world’s largest shipbuilder, CXMT’s memory chips are increasingly competitive with those from Samsung and in areas such as EVs and autonomous vehicles, Chinese technology is the most advanced.
Chinese use of subsidies to support its industries has also resulted in the development of overcapacity that allows Chinese firms to undercut their rivals. If U.S. tariffs stay relatively high, that will push excess Chinese production into markets where Korea and China compete head-to-head, further eroding Korean competitiveness.
While U.S. and Korean firms face the same challenges from China — forced technological transfers and overcapacity — any Korean approach will need to balance the unwillingness of the Trump administration to work with allies on common problems against Chinese pressure on Seoul.
While many of the challenges will be economic, tensions dating back to the first Trump administration may well be a factor in China’s relaxation of North Korea sanctions enforcement. Without bringing China back as a responsible partner, the U.S.-China trade war will indirectly impact the degree to which Seoul will be able to engage Pyongyang.
Navigating the U.S.-China rivalry will require a pragmatic approach that sets aside old ideas and develops new approaches grounded in a shift away from an international environment centered on U.S. power to one dominated by geostrategic rivalry. That will require the new administration to take a more transactional approach to both China and the United States, but also accept that despite shared interests, the U.S. may not always be a willing partner in addressing shared challenges.
Troy Stangarone is the director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy and the deputy director of the Indo-Pacific Program at the Woodrow Wilson Center.