The ramifications of the US-China trade war has hit South Korea the hardest in 2019 with exports dropping nearly 10 percent in the first three quarters, according to a new report by the Woori Finance Research Institute.
The export contraction was the worst out of the world’s top ten economies. South Korea’s economy relies on exports to China which makes up 27 percent of all exports.
The report highlighted that a Phase One trade deal could make the economy rebound from its worst slump since the Great Economic Crisis ten years ago.
“Since South Korea was most negatively affected by the rise in import tariffs (of US and China), a deal in the first phase trade negotiations will have a positive impact on South Korea’s economic growth next year by boosting global investment sentiments and trade,” stated the report.
However, the US-China trade deal has been stalled by two key elements that neither the US or China want to budge on. Beijing wants the US to cancel all existing tariffs and also looming round of tariffs on electronic goods valued at $156 billion.
Trump in turn wants China to guarantee agricultural purchases to maintain support in farming states in the US in the run up the US presidential elections next year.
South Korea’s economy has also been hit by its own trade war with Japan. South Koreans have boycotted all things “Made in Japan” since Japan slapped export restrictions on key materials needed in South Korea’s tech manufacturing supply chain — a move economists characterized as “weaponizing trade.”
The South Korea-Japan trade war started last year when the South Korean Supreme Court ordered Japanese corporations to pay reparations for their involvement in slave labor on the Korean Peninsula during its occupation in 1910 to 1945.
The Japanese government claims the Korean court ruling comes in direct conflict with a 1965 treaty between the two countries that explicitly stated all war time compensation claims were “completely and finally” settled.
Additionally, the central bank of South Korea forecast the economy to stall coming into 2020 as a result of regional and global trade tensions. The central bank’s board stated that global trade was expected to contract due to ongoing global trade tensions.
“Looking ahead, the Board sees global economic growth and the global financial markets as likely to be affected by factors such as the degree of the spread of trade protectionism, the changes in the monetary policies of major countries, and geopolitical risks,” said the central bank in a statement released last month.