China and South Korea’s Economic Relationship, With a Focus on the United States Variable


It would in no way be an understatement to consider South Korea one of the most obvious victims of the trade tensions between China and the United States. In light of the fact that 4 out of 10 external shipments of South Korea have either China or the US as their destination, let’s just say South Korea cannot afford to decisively cut ties with either of the economic giants.

From a political perspective, in light of South Korea’s strategic partnership with the United States, there are definitely pressures coming from the direction of the US for South Korea to take its foot off the pedal when it comes to trade with China. The United States encouraging the South Korean administration to no longer use Huawei products is an eloquent example in this direction. In theory, it sounds like something reasonable for South Korea to do, especially given the fact that the domestic Samsung would have to gain if this were to occur.

There’s just one problem, a $162.2 billion one in 2019 alone: South Korea’s exports to China for 2018 alone. Not only are South Korea’s exports to China not decreasing, they’re actually increasing in a fairly dramatic manner, up 14.2% in 2018 compared to 2017. Furthermore, South Korea is one of the most widely-cited examples of countries running a healthy surplus and while that has slowed down a notch in 2018 (with exports increasing by 5.5% YOY, compared to imports which went up by 11.8% YOY), we’re still talking about a nation with a trade surplus of over $70.5 billion for 2018 (with exports at $605.5 billion and imports at $535 billion).

As such, the heavily trade-oriented South Korea (with its over $1 trillion trading volume that it managed to reach for two years in a row) cannot afford to succumb to political pressures such as those coming from the direction of the United States.

Of course, it aims to keep the US satisfied as well and trades quite a bit on that front as well, but the $72.7 in exports to the United States for 2018 describe an increase of “only” 6% (which sounds like a lot and actually represents a decent achievement, but is nevertheless underwhelming when compared to the 14.2% YOY increase in exports to China) and its total export volume is less than half its export volume to China.

As always, it’s worth pointing out that the United States puts more than just trade numbers on the table. In matters such as defense, it helps provide the military stability South Korea needs in light of its complicated relationship with North Korea. However, just like with Japan and many European nations, the military status quo is at risk of being renegotiation in light of the fact that the United States is not happy with the fact that it has to invest exponentially more than others in defense for international security purposes.

Few things are completely predictable or set in stone in the world of geopolitics and perhaps South Korea is a textbook example when it comes to being caught between a rock and a hard place. Not that it is complaining, with its export-driven economy (South Korea represents the world’s number six exporting nation, the #12 global player in terms of nominal GDP and country #14 in terms of PPP GDP) that leads to impressive surpluses and record-breaking economic performances in many of the world’s most cutting edge fields.

Should it continue to successfully juggle priorities as far as its relationship with China and the United States is concerned, South Korea is poised to continue to represent a strategic partner for both economic giants. Should it, however, be forced to make the decision it can’t possibly comprehend having to make (choosing between its robust trade volume with China and the strategic advantages of its US relationship)… needless to say, things could get tricky.

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