Korea Caught in US-China Conflict... Taiwan Exports Also Unstable

[Image source=Yonhap News]

As U.S. House Speaker Nancy Pelosi's visit to Taiwan (Taipei) escalates U.S.-China tensions to their worst, concerns are emerging that South Korea will face significant burdens in trade with Greater China regions including China, Taiwan, and Hong Kong. With the confrontation between the U.S. and China showing signs of expanding beyond trade into advanced technologies and other areas, analysts believe South Korea cannot avoid collateral damage.

According to the Korea International Trade Association on the 4th, the trade volume with Taiwan in the first half of this year reached a total of $28.289 billion, a 28.2% increase compared to the same period last year ($22.061 billion). Taiwan ranks 6th among all trading partners. During this period, the trade balance recorded a surplus of $529 million, with trade activity regaining momentum since last year after a slowdown due to COVID-19. Hong Kong's trade volume also expanded, reaching $16.918 billion and ranking 9th in the first half of this year.

The problem is that trade sanctions have intensified, such as the Chinese General Administration of Customs banning food imports from over 100 Taiwanese companies the day before Pelosi's visit, increasing uncertainty for domestic export companies. While exports of food and confectionery products to China may increase immediately, sectors like aviation and IT are closely monitoring the situation.

In particular, the U.S. move to block investments in advanced semiconductors targeting China, and the promotion of the so-called 'Chip 4 Alliance' including Taiwan, South Korea, and Japan, also pose burdens for Korean companies. South Korean firms that use China as a semiconductor production base face complex calculations amid U.S.-China tensions. Joining the Chip 4 Alliance raises the risk of economic retaliation from the Chinese government, while non-participation could lead to exclusion from the U.S.-led semiconductor supply chain. If China's blockade of Taiwan prolongs, supply chain disruptions for semiconductors and IT devices will be inevitable.

Another negative factor is that South Korea's trade balance with China has recorded deficits for three consecutive months for the first time in 30 years, indicating instability in trade with China. Although short-term factors like China's lockdowns have had a significant impact, the fundamental issue is that South Korean products are no longer highly competitive in China, which poses a greater risk. If trade with China and the Greater China region falters, it is expected to inevitably impact South Korea's overall trade balance.

Professor Jeong In-gyo of Inha University's Department of International Trade said, "With U.S. House Speaker Nancy Pelosi's visit to Taiwan, the U.S.-China conflict will accelerate decoupling especially in advanced technology sectors," adding, "For South Korea, there is great concern about the impact on exports to China in advanced industries."

This content was produced with the assistance of AI translation services.