Effective today, Japan will remove South Korea from its list of trading partners eligible for preferential export procedures. The move
Effective today, Japan will remove South Korea from its list of trading partners eligible for preferential export procedures.
The move is the latest escalation in tensions between the two countries after historic animosity bubbled to the surface last month from a spat over bilateral trade.
After today, Japanese companies will have to go through additional procedures to export more than 800 “strategic materials”—primarily three chemicals crucial to the production of semiconductors and displays, key component’s of the South Korean electronics industry—to South Korea, potentially delaying this process by weeks or even months. This will likely have an adverse effect on the supply chains of South Korea’s largest tech firms like Samsung—the world’s largest smartphone producer—and the semiconductor company SK Hynix, as well as the companies that rely on these key inputs for smart-device production such as Apple and Huawei.
Concerns about further escalation of the dispute are multifold. Allies of both South Korea and Japan, like the United States, fear rising economic tensions will transfer to political tensions in the region. Just last week South Korea ended an intelligence-sharing agreement with Japan, raising concerns in Washington that a rupture of relations could jeopardise US strategy toward North Korea.
Likewise, concerns of a second trade war between Japan, the world’s third largest economy, and South Korea—the twelfth largest—will cause further jitters amid anxiety over a global economic slowdown.
Escalatory moves are to be expected, possibly with the imposition of more export restrictions from Japan or even restrictions originating from South Korea.
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