U.S.-China conflicts on COVID-19 reignite tensions in global trade

South Korea’s benchmark KOSPI has fallen below 1,900 points again on Monday. It is because foreign investors sold Korean stocks worth one trillion won due to the anxiety that the trade war between the U.S. and China in a state of lull could be resumed. It threw a wet blanket to the South Korean economy, which started to have hopes that economic activities, would become more active soon as the country successfully flattened the COVID-19 curve compared to other countries.

What triggered the possibility of a trade war between the world's two largest economies was U.S. President Donald Trump’s remarks that Washington may impose additional tariffs on one trillion dollars worth of Chinese goods, saying that China should be held responsible for the spread of the COVID-19 outbreak.

South Korea’s exports plummeted by 23 percent year-on-year in April, and the trade balance is in deficit for the first time in 99 months since January 2012. If Trump starts to batter China to create public opinion favorable to him before the 2020 presidential election in November, it would be another mega-blow to South Korea, which was already severely affected in the exports market and global supply chains amid the prolonged pandemic.

A flash of hope is that South Korea earned a good reputation in the curve-flattening process and its economic potential is highly assessed in the global market. For instance, the price of DRAM memory chips recorded the highest increase in 39 months in April thanks to the projections that non face-to-face activities would increase in the future. Samsung Electronics and SK Hynix accounted for more than 70 percent of the share in the global market last month. South Korea is also doing well in the automobile market as Hyundai Motor became the highest-selling brand in the Vietnamese market last month, exceeding Japan’s Toyota.

The South Korean economy has still lots of stumbling blocks ahead. The global economy is at the beginning of a recession and the trade war is likely to be prolonged until the U.S. presidential election in November. South Korea needs to do what we can and should do in this situation. The South Korean government should revitalize the domestic market by boosting consumption and raise morale of businesses by easing various regulations. In the long term, South Korea should increase the ratio of domestic consumption to cope with the post-COVID-19 era with stronger protectionism, while working on diversifying the exports market to the South East Asia, India, Europe and more.