Seoul: Trade war tensions between the US and China are escalating again, ending months of an uneasy truce. Beijing recently announced restrictions on its exports of rare earths, followed by US President Donald Trump declaring an additional 100 percent tariff on imports from China, effective November 1. This move would increase US tariffs on China to 130 percent, approaching the 145 percent rate imposed in April before a temporary truce was reached.
According to Yonhap News Agency, the latest tariff is effectively a ban on China's exports to the US. President Trump also mentioned implementing export controls on critical software. In response, China's Ministry of Commerce stated that while they do not wish for a trade war, they will take resolute measures if the US persists. This growing confrontation threatens to severely disrupt the global economy, with financial markets already unsettled and stocks plunging in New York and Europe. Experts warn of a potential simultaneous recession and high inflation globally.
The ongoing trade conflict poses significant challenges for South Korea, whose economy is heavily reliant on exports and tied to Chinese supply chains for rare earths. The situation is exacerbated by Seoul's ongoing tariff and investment negotiations with Washington. Beijing's restrictions on rare earth exports will heavily impact South Korea's high-tech sectors, including semiconductors and electric vehicles, as China is the largest producer and processor of these critical materials.
The new Chinese export curbs not only cover rare earth materials but also related intellectual property and technologies, requiring foreign entities to obtain a license for exports containing or manufactured with China's technology. This could hinder South Korea's semiconductor and electric vehicle production. As the US implements the additional tariff, South Korea's exports are expected to suffer significantly, with the Korean currency exchange rate already rising sharply and foreign capital potentially exiting the market.
The South Korean government is urged to stabilize foreign-exchange and financial markets and consider currency swap agreements with the US. Korean industries are advised to quickly find alternative rare earth suppliers and invest in overseas resource development projects. Although there remains a possibility for a last-minute agreement if Trump and Xi attend the APEC summit, the trade conflict's resolution is uncertain. Seoul must prepare for the ongoing risk of being affected by the superpowers' trade disputes and develop long-term strategies to mitigate impacts.