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Trade war

Trump protectionism jolts South Korea's growth engine

12% fall in shipments to US pushes exports down the most in two years

SEOUL -- Speaking after South Korea posted its biggest fall in exports for more than two years, the nation's trade minister warned that the protectionist polices of U.S. President Donald Trump threatened the growth engine of Asia's fourth-biggest economy.

Kim Hyun-chong said the escalating trade war between the U.S. and China -- South Korea's two largest trading partners -- could cut the country's exports by $1.5 billion per year, about 0.3% of total shipments overseas. But there will be bigger downside risks stemming from the dispute, his ministry said later.

Led by a 11.8% fall in shipments to the U.S., data released Monday showed overall exports tumbled 8.2% year-on-year -- the sharpest fall since July 2016.

While the trade ministry attributed the September drop to fewer working days in the month due to the Chuseok, or Korean thanksgiving, holidays, it also said it is monitoring the impact of the trade war on exports and the economy in general.

Park Hee-chan, an economist at Mirae Asset Daewoo, said the trade war will weigh on South Korean exports.

"If the U.S.-China trade war is not solved within this year, it will inevitably affect our exports negatively," he said. "Still, it is not easy to measure the impacts in numbers, but I am sure that global trade will be under downside pressure."

On the flip side, shipments to China rose 7.8% because of rising demand for semiconductors related to the internet of things and artificial intelligence. Kim said the trade war could help South Korean exports to China.

"If China cannot export to the U.S., or the U.S. cannot export to Chinese market, considering such chances we can export about $800 million more," he said.

A truck transports containers at Hanjin Shipping's terminal at the Busan New Port in South Korea.   © Reuters

In the first 20 days of September, exports of petroleum products to the U.S. plunged 22.5% from a year ago as the U.S. boosted home operation of refinery facilities.

Another casualty of the trade war could be seen in exports to Vietnam falling 16.6%. Under pressure from the Trump administration, South Korean home appliance makers are shifting production lines from the Southeast Asian country to the U.S.

The U.S. and South Korea last week signed a revised free trade agreement, completing 14 months of negotiations sparked by Trump's accusation that the deal was "horrible."

Under the revised deal, a U.S. automaker can export up to 50,000 vehicles -- double the current figure -- to its ally without any South Korean safety checks.

Emerging market uncertainties also damped exports. Shipments to Latin America tumbled 42.7% on growing political uncertainties in the region and the falling value of currencies in Argentina, Mexico and Brazil.

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