A consensus on North Korean sanctions by the U.S and China will be beneficial to South Korea, as this could delay Washington’s plan to deploy the Terminal High Altitude Area Defense system on the peninsula.
In return for an agreement on reprimanding North Korea, the U.S might decide to halt -- albeit temporarily -- the deployment of THAAD. This could help South Korea avoid clashing with China on the commercial front.
Trade, Industry and Energy Minister Joo Hyung-hwan recently dismissed the possibility of China seeking revenge against South Korea through trade if the U.S. eventually deploys the asset on the peninsula. He predicted that the bilateral economic issues would be dealt with separately from political matters.
This seems plausible, as China is unlikely to impose economic sanctions on Korea. However, the idea that political and economic considerations between the two countries will be kept separate does not seem to be a valid assumption.
It would be naive to forecast that the Asian superpower would retaliate publicly or bluntly against South Korea, the world’s 13th-largest economy and one of its core trading partners. Moreover, the two sides have signed a free trade agreement, which took effect in late 2015.
But there is a possibility that the country could reinforce trade barriers to hold back South Korean exporters. For example, it may target Korean manufacturers, especially those involved in steel products, in an antidumping crackdown. The FTA’s stipulations on antidumping and trade remedies still remain ambiguous.
Its antitrust regulator could also proactively act against price-fixing or cartels among Korean firms, even without any substantial evidence. Another target could be Korean commercial banks operating there.
These actions could take place in a low-key manner to avoid overall friction in commerce. In this case, specific industries and firms in Korea could become victims of the proposed THAAD deployment.
Another impact of the deployment is that it could cast a shadow over local tourism, lodgings and the airline industry. A political conflict may invite anti-Seoul sentiment among Chinese, who make up a dominant proportion of inbound tourists.
A rapid drop in visitors from China could have an adverse impact on local duty-free shops, department stores, cosmetics companies and hotels, especially since conglomerates have been expanding such facilities to target the influx of Chinese tourists.
Undoubtedly, Chinese Ambassador to South Korea Qiu Guohong’s caution to the Korean government could be a haughty challenge. Earlier this week, he warned of a possible destruction of bilateral relations, reiterating the country’s opposition to the deployment of advanced U.S. missile assets here.