China and the European Union are gearing up for a trade war with the U.S. that raises fears for massive Korean exports of intermediate goods to those regions.
According to the Korea International Trade Association, the country's exports to China stood at US$142.1 billion last year, accounting for 24.8 percent of its total exports. Exports to the U.S. totaled $68.6 billion or 12 percent, and to the EU $54 billion or 9.4 percent.
Together that makes a whopping 46.2 percent of the nation's total outbound shipments.
So a full-blown trade war between the U.S. and China and the EU, whose prospect has already prompted the resignation of U.S. President Donald Trump's economic adviser, could have a direct impact on Korea's exports.
Hit hardest would be intermediate goods like steel, auto-parts and other half-made products which make up most of Korea's exports.
Intermediate goods accounted for 78.9 percent of Korea's total exports to China last year, 58.8 percent of exports to Germany, 53.34 percent of exports to France and 49.4 percent of exports to the U.S.
KITA said that a 10-percent drop in China's exports to the U.S. after the imposition of high tariffs would lead to a quarter-percent decline in Korea’s exports to China due to decreasing demand for intermediate goods.
Korea's trade-to-GDP ratio stood at a massive 68.8 percent in 2017.
Chung In-kyo at Inha University said, "If the U.S., China and the EU launch a trade war, Korea will inevitably take a huge hit, since its GDP is relatively small and the country is highly dependent on those regions for exports. The high proportion of intermediate goods in total shipments will make the impact even more severe."