(Bloomberg) -- The negative impact on South Korea’s exports to China stemming from fresh tariffs Donald Trump has reportedly proposed imposing on Beijing would be at least twice as large as the effect from the previous US-China trade war, according to a central bank study.
As a major supplier of intermediate goods to China, South Korea would suffer a 7% drop in exports to the world’s second-largest economy due to the proposed 60% duties on Chinese goods, with a similar hit to related production, compared with an impact of about 3% in 2018, Bank of Korea researchers said Monday in a report.
The report is one of the earliest examinations of the potential impact of a second Trump administration on the economy of an individual nation. Earlier, UBS Group AG analysts estimated new tariffs of 60% on all Chinese exports to the US would reduce China’s annual growth rate by more than half.
The Washington Post reported earlier this year that Trump was considering imposing a flat 60% tariff on Chinese imports if he returns to office. The former US president, who is competing against Vice President Kamala Harris, later told Fox News the rate could be even higher if he wins the November election. A Gallup poll last week put the approval rating for Democratic nominee Harris at 47% with Trump’s at 41%.
The Bank of Korea researchers estimated China would lose 2.5% in gross domestic product while South Korea would suffer a 1% reduction if Trump went ahead with his reported tariffs as president. China’s economy expanded 5.2% last year while South Korea grew 1.4%.
Most nations in Asia have their economic activity tied to China one way or another as the manufacturing giant buys everything from energy to intermediate goods used to assemble products destined for consumers around the world. Trade friction between China and the US has a particularly acute impact on trade-reliant economies such as South Korea’s while also heightening political pressure given security guarantees that Washington may provide.
South Korea hosts 28,500 American troops to defend against North Korea and has leaned more toward the US under current President Yoon Suk Yeol. Its economic relations with China have turned more competitive in recent years as Beijing promotes the growth of domestic industries that can help replace imports. US export restrictions on advanced semiconductors to China have also weighed on South Korea’s trade with China.
©2024 Bloomberg L.P.
