The US-China Trade War and the Korean Economy’s Risk Mitigating Strategies

Abstract

Purpose – The objective of this study is to examine the risk effects of the US-China Trade war and to derive risk mitigating strategies for the Korean economy. Design/methodology/approach– This study examines and compares the US-Japan and US-China trade war to find out the real aspects of the US-China trade war. Then it attempts to assess the risks of the Korean economy which is affected by the trade war. Considering the complexity of the trade war, numerous research materials in various fields such as geopolitics, strategic trade issues, global value chains and internalization theory are examined and discussed for the study to derive effective risk mitigating strategies. Findings– The Korean economy, which heavily relies on both markets, should take an effective strategy not only to minimize the adverse effects but also to take advantage of the trade war. In the short term, Korea should diversify the markets which are less affected by the trade war. Also, it should take a active stance for joining the RCEP and CPTTP. In the long term, Korea should reinforce its value chain by enhancing the low ratio of technology export-import ratio. In order to mitigate the increasing protectionism, more FDI’s in the United States and other strategic regions are recommended. Research implications or Originality– This research offers the risk mitigating strategies for the Korean economy which is at stake in the middle of two largest trade partners. This study attempts to offer a comprehensive short term and long term risk mitigating strategies for the Korean economy in the risk management framework.