China Imposes Retaliatory Tariffs on US... 3 Reasons Why South Korea Finds It Difficult to Respond [Why&Next]

As the United States imposed an additional 10% tariff on Chinese products, China responded by imposing an additional 10-15% tariff on American products and decided to control exports of raw materials such as tungsten, escalating the US-China conflict into a 'strong versus strong' confrontation reminiscent of Trump’s first term. South Korea’s situation is different. Having been excluded from the primary tariff targets designated by US President Donald Trump, South Korea is closely monitoring the situation and is considering a strategy to partially accept US demands, such as expanding imports of American products. Unlike China, South Korea is in a position where concessions through negotiation, rather than direct confrontation, are inevitable.

On the 5th, Professor Heo Yoon of Sogang University Graduate School of International Studies said in a phone interview with Asia Economy, "China’s retaliatory tariffs are possible because China, along with the US, is one of the two major global powers (G2) capable of standing up to the US, and it has the capacity to endure a trade war based on its enormous domestic market. However, South Korea faces a significant power imbalance with the US and has a high dependence on external trade, making direct retaliation against the US difficult."

Kim Young-gwi, Senior Research Fellow at the Korea Institute for International Economic Policy, analyzed that China intends to play a central role for countries competing with the US through direct confrontation. He said, "One of the reasons China confronts the US is the global hegemony competition. To serve as a rallying point for countries with similar positions to China, it raises its voice strongly in areas where it can confront the US."

The US-China trade war also broke out during Trump’s first term. In 2018, the Trump administration triggered the conflict by imposing a 25% tariff on $34 billion worth of Chinese imports. China then imposed retaliatory tariffs of 25% on US products, officially starting the trade war. The impact of the US-China trade war was concentrated on American agricultural products, especially soybeans. China imposed a 25% tariff on $34 billion worth of US products annually, focusing on soybeans, corn, wheat, beef, and pork, aiming to hit Trump’s core support base in agricultural regions. China also reduced imports of these agricultural products from the US and diversified its import sources to countries like Brazil. As a result, US soybean exports to China sharply declined. Eventually, the US postponed imposing new tariffs on Chinese products, and China agreed to purchase $50 billion worth of US agricultural products as part of the Phase One trade agreement signed in January 2020.

However, South Korea finds it difficult to impose retaliatory tariffs on the US like China. This is due to economic reasons that force South Korea to be cautious of the US. For South Korea, which has a high dependence on external trade, the US is an indispensable market. Maintaining a moderate relationship rather than confrontation maximizes South Korea’s economic interests. South Korea recorded a trade surplus of $55.7 billion with the US last year. Kim explained, "South Korea exports much more to the US than it imports, so if the US raises tariffs, Korean products will be significantly affected. While South Korea could symbolically file a complaint with the World Trade Organization (WTO) if additional tariffs are imposed, the practical benefits are limited, so negotiations are pursued simultaneously."

Another factor limiting direct confrontation is that the US holds the core technologies behind South Korea’s main export products, such as semiconductor design. Professor Heo said, "The US holds patents for various core foundational technologies used by South Korea, from semiconductor design technology to artificial intelligence (AI) and robotics. The fact that the US regulates products made by companies using its technology also acts as a practical constraint." There is also a national security aspect. Approximately 28,500 US troops are stationed in South Korea. Professor Heo said, "South Korea is heavily dependent on the US for security. Being effectively under the US nuclear umbrella, South Korea inevitably needs to maintain a close relationship with the US."

Professor Heo predicted that the Trump administration’s efforts to check China in its second term would proceed faster and more strongly. He said, "Looking at Trump’s recent executive orders, based on experience from the first term, the US has a high understanding of China, so many US measures are much more direct and demand very rapid implementation. However, the US is leaving room for negotiation, as seen in the cases of Mexico and Canada. South Korea should actively pursue negotiations that balance its interests by leveraging this point."