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Analyst: U.S.-China trade war could impede North Korea progress

By
Elizabeth Shim
North Korean leader Kim Jong Un visiting Chinese President Xi Jinping in Beijing in June. About 90 percent of North Korea trade is conducted with China, and the two countries have reaffirmed ties. File Photo by KCNA/UPI
North Korean leader Kim Jong Un visiting Chinese President Xi Jinping in Beijing in June. About 90 percent of North Korea trade is conducted with China, and the two countries have reaffirmed ties. File Photo by KCNA/UPI | License Photo

NEW YORK, Oct. 4 (UPI) -- The ongoing U.S.-China trade dispute could impede progress on U.S. North Korea policy and even hurt the South Korean economy, a U.S. analyst says.

Troy Stangarone, senior director of congressional affairs and trade at the Korea Economic Institute in Washington, D.C., told UPI in a phone interview on Wednesday the tit-for-tat tariffs being set by the world's two biggest economies could later haunt the Trump administration.

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President Donald Trump had pledged earlier in his presidency to be on better terms with China if President Xi Jinping coordinates with Washington on North Korea.

"China has played an important role in bringing North Korea to the table," Stangarone said. "My guess is right now Xi Jinping probably doesn't believe this is a good deal on trade for China."

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There have been signs China has relaxed some North Korea restrictions. State-approved North Korean workers have been seen in the streets of Dandong, a Chinese border city, and traders are bringing North Korean goods to China.

Stangarone said China-North Korea exchange is up, but Beijing, for the most part, is abiding by international law.

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"At the moment, while we've seen, for example, an increase in Chinese tourists in North Korea, there's been some suggestion that maybe border enforcement isn't as robust as it was before," the analyst said, but "right now China is largely still enforcing sanctions."

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With the two countries plunging deeper into a trade war, the risks are greater, ahead of U.S. Secretary of State Mike Pompeo's visit to Pyongyang on Sunday.

"The challenge is going to be if talks with North Korea break down, or don't progress as we've been having difficulties already, and there's a need to apply greater pressure to North Korea," Stangarone said. "I think we might find China reluctant.

"At the same time, President Trump hasn't really followed through with what he pledged to President Xi."

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While the U.S.-China standoff is a cause for concern on North Korea, South Korea's economy could also take a hit from the escalating tariff wars, even as it adjusts to new amendments in the bilateral trade agreement with the United States.

"In the immediate sense, South Korea's position is detrimental," Stangarone said, adding South Korea takes 55 percent of its trade to China for processing.

South Korean firms, like those in other post-industrial economies, use China as a manufacturing platform.

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But the "bigger issue for South Korea, for using China as a manufacturing platform is going to be ultimately how this impacts overall Chinese growth," Stangarone said.

"If we see Chinese growth decline and there's always suggestions that it's probably fallen to about 5 percent from its normal 6.5 to 7 percent, that's going to mean you're going to see decreased demand for South Korean goods and South Korean parts sold in China."

China's is South Korea's largest trading partner.

Meanwhile, Seoul has agreed to open its markets more to U.S. auto exports -- a part of the revisions to the Korea-U.S. Free Trade Agreement signed last week by Trump and his South Korean counterpart Moon Jae-in.

Stangarone said Trump's plan to double the number of U.S. vehicles sold in South Korea will take some time to realize, owing to a structural deficit between the two countries and differing market size.

"Hyundai and KIA will always sell more vehicles in the United States than Ford will in South Korea," the analyst said, adding foreign car sales in Korea are prominently luxury vehicles.

"The United States primarily produces passenger vehicles."

Hyundai Motor Co. said it supports the new trade pact between the two countries.

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"Hyundai supports free trade and highly values the trade pact between the United States and Korea. The agreement has been mutually beneficial, and we are pleased that the renegotiations have officially concluded and that both countries remain committed to this special relationship," a Hyundai Motor spokeswoman told UPI by email.

Trump has said the revised FTA would reduce the U.S. deficit.

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