South Korea is caught in the crossfire of the US-China trade war

SOUTH Korea is not just one of the United States’ most important strategic allies in Asia. It is also one of America’s largest trading partners, especially after the US-Korea Free Trade Agreement (Korus) entered into force in 2012. In fact, the US is South Korea’s second-largest export market after China.

Once one of the world’s poorest countries, South Korea is currently the world’s 14th-largest economy and the fourth-largest in Asia, with a nominal gross domestic product of US$1.7 trillion, or US$33,121 per capita. But its economic miracle is increasingly jeopardised by the shifting geopolitical terrain, particularly the escalating rivalry between the US and China.

To understand the scope of South Korea’s economic miracle, it is important to remember that at the end of the Korean War, its GDP per capita was 40 per cent that of Ghana. After three years of brutal fighting that destroyed most of its infrastructure, South Korea had few natural resources, a negative savings rate, and virtually no exports.