South Korea says US-China trade war may hit exports of intermediary goods

[SEOUL] South Korea on Thursday warned that an escalating trade dispute between the United States and China could hit its exports of "intermediary goods" used in home appliances, computers and communications devices.

South Korea's trade ministry said in a statement that the trade war could be "prolonged and spread," adding that it would prepare responses and scenarios to cope with the economic impact of the trade row.

On Wednesday, Beijing accused Washington of bullying and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 per cent tariffs on US$200 billion of Chinese goods.

The heightened trade tensions pose risks to South Korea, Asia's fourth-largest economy, as both the United States and China are the country's major trading partners.

"We have detailed analysis (on which products will be affected by the US-China trade war)," Deputy Minister for Trade Kang Sung-chun told Reuters after a pair of industry meetings on trade issues.

"The impact will be mixed. There will be both positive and negative effects. Some Korean exports could replace Chinese goods to be slapped with tariffs, for example," he said.

South Korea's exports to China jumped 30 per cent in June, driven by chips and other intermediary goods, the trade ministry said earlier this month. "China's closest neighbours, namely Japan, Korea and Hong Kong, are most vulnerable to a US-Sino trade war because they export mostly intermediate goods to China," OCBC Bank said in a note.

OCBC estimated that in a scenario where US tariffs apply to US$250 billion worth of Chinese goods, South Korea's GDP growth could be hit by 0.3 of a percentage point while Japan's growth could be hit by 0.2 of a percentage point.

REUTERS