US-China trade war set to weigh down SK economy

Monitoring Desk

SEOUL: The prolonged trade discord between the United States and China is anticipated to exert a negative impact on the South Korean economy throughout 2019, local experts said Sunday.

According to the study conducted by Yonhap News Agency of leading economists at local think tanks, the trade dispute, which emerged as a hurdle for the nation’s economy in 2018, is likely to dampen growth in the new year. “Due to the discord between Washington and Beijing, the overall trade around the globe will slow down. The increase in exports of chips by South Korea will also lose ground,” said Choi Jeong-pyo, president of the Korea Development Institute (KDI).

Kwon Tae-shin of the Korea Economic Research Institute (KERI) echoed the view, claiming South Korea, which depends heavily on trade, is highly vulnerable to the conflict.

“Even if the tension is eased to some extent to open room for negotiations, the U.S. will still maintain its protectionism-oriented policy,” said Lee Dong-geun, the head of the Hyundai Research Institute (HRI).

The experts also cited Britain’s exit from the European Union, the slowing global chip market, and financial instability from emerging markets as potential threats to the South Korean economy next year.

The U.S., meanwhile, is expected to revise up its key rate two times throughout next year.

“The Federal Reserve is anticipated to take the government’s concern into consideration,” said Kim Do-hoon, the acting director of Institute for the Future of State (IFS).

“If the speed of the rate hike slows, the uncertainties of the global financial market will also be reduced,” Lee added. “But if the rate hike continues, it may emerge as a hurdle for the U.S. economy’s recovery as it leads to a bigger burden for businesses and households’ loans.”

The exchange rate of the South Korean won to the greenback was estimated between 1,090 won and 1,173 won.

“The variability (of the foreign exchange market) will become relatively high due to external uncertainties,” Choi Jeong-pyo, president of Korea Development Institute (KDI), said.

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