More than half of export-oriented manufacturing companies are concerned about worsening supply chains, but only 2.4% have established countermeasures. There are growing calls for urgent institutional support to help companies respond to supply chain risks arising from tighter export controls by both the United States and China.
According to the report "Trump's Second Term: Supply Chain Risk Perceptions and Implications for Korean Companies under US and Chinese Export Controls," published on April 27 by the Korea International Trade Association's Institute for International Trade and Commerce, it was found that both the United States and China are expanding their regulatory reach beyond their own borders to third-country companies, significantly increasing the likelihood of a deepening supply chain crisis for Korean firms.
The United States is applying the Foreign Direct Product Rule (FDPR), which regulates third-country companies exporting products containing US technology. Meanwhile, China has completed revisions to its extraterritorial application regulations for dual-use items and established the legal basis for sanctions against foreign companies.
The report particularly highlighted the potential impact of Chinese sanctions on third-country companies on Korean exports. Concerns have been raised that export disruptions to the United States may become a reality, given Korea's heavy dependence on China for key critical minerals such as tungsten oxide (80.4%), tungsten carbide (91.4%), molybdenum bars (99.7%), rare earth compounds (61.1%), and rare earth metals (79.8%).
While short-term responses such as expanding stockpiles are possible, the report also warned that repeated supply delays and controls could lead to structural supply chain risks.
In a survey conducted by the Korea International Trade Association of 740 export manufacturing companies, 53.4% anticipated a deterioration in supply chain procurement conditions, while only 2.4% had prepared countermeasures. As many as 51.8% of companies responded that they had no special measures in place. Companies cited diversification of procurement sources (64.7%) and strengthening supply chain monitoring (42.6%) as their main response strategies.
The main difficulties faced by companies included rising raw material prices due to exchange rate fluctuations (63.4%), problems with sourcing raw materials and intermediate goods (42.4%), and customs clearance delays caused by Chinese export controls (24.9%). The most needed forms of support were cited as expansion of policy-based financial support (60.0%) and assistance with diversification of procurement sources (42.3%).
The report suggested the following measures to address supply chain risks: diversification of export destinations and procurement sources, expansion of G2G (government-to-government) cooperation for critical minerals, establishment of protective mechanisms for companies in anticipation of US-China sanctions conflicts, and increased policy-based financial support for at-risk firms.
Jinsil, Senior Research Fellow at the Korea International Trade Association, pointed out, "Since the start of Trump's second term, Korean companies have been suffering from both rising costs and supply disruptions due to intensifying US-China tensions." She emphasized the need to support companies in diversifying their export destinations and supply chains to Global South countries such as India and Indonesia, and to establish institutional measures such as guidelines and compensation systems to help companies cope with foreign sanctions conflicts.
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