(EDITORIAL from Korea Times on Oct. 15)

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(EDITORIAL from Korea Times on Oct. 15)

Trade specter over APEC

Government must be innovative in safeguarding economic interests

After seemingly avoiding direct clashes in their four rounds of trade talks this year, China and the United States have upped the ante with expanded export controls and retaliatory tariffs two weeks ahead of the Asia-Pacific Economic Cooperation (APEC) Economic Leaders' Meeting in Gyeongju, North Gyeongsang Province, later this month.

Naturally, the markets were rattled, and the Korean won hit a new low Monday, prompting a verbal intervention from the Korean government. The U.S. and China then began to dial down the tension a bit, with U.S. President Donald Trump posting on social media Sunday (local time) that Chinese President Xi Jinping "doesn't want Depression for his country, and neither do I." He also added that the U.S. doesn't intend to hurt China and wants to help. China, for its part, said it is ready to talk but also to fight.

With tensions calmed for the time being, the planned summit between Trump and Xi is expected to go ahead, according to U.S. Treasury Secretary Scott Bessent. Bessent also added that "The 100 percent tariff does not have to happen," referring to Trump's threat launched in the wake of China's expanded rare earths export control.

However, the expanded export controls on rare earth elements announced by China's Ministry of Commerce are set to go into effect Nov. 8. These materials are crucial, used in everything from semiconductors to electric vehicles, batteries and military radars, and even familiar electronic staples like LED televisions and laptops. The Chinese Ministry of Commerce said it will also place export limits on technologies related to rare earth elements.

Korea, as a major semiconductor producer and exporting nation, sources around 80 percent of its rare earth materials from China. China is the largest rare earth producer in the world, accounting for 70 percent of rare earth mining and 90 percent of processing. Reports say it is hard to estimate how China's expanded export limits will affect Korea, but Seoul is no stranger to Beijing's export restrictions, as it experienced in 2021 with disruptions to its urea supply. However, Korea has not yet started to set up a more diverse supply chain for rare earth materials, as neighboring Japan did following a 2010 dispute over the Senkaku Islands, in which China stopped its export of rare earths. The United States has also started to mine rare earths from its own land, but remains in the beginning stages.

Seoul needs to take China's latest trade maneuvers seriously and find innovative ways to diversify its sourcing of rare earths — all the more so as the semiconductor sector is regarded as having entered a "super cycle," with increased demand from artificial intelligence infrastructure development.

Korea needs to deal aggressively with both the looming rare earths export controls from China and the problem of future access. Being sandwiched between major superpowers — this time the United States and China — is unfortunately a situation Korea knows well. But trade and economic issues are dominating the national agenda, and Seoul must assert itself in identifying, procuring and securing its economic interests, including materials and markets.

The latest trade escalation also comes as Seoul continues its efforts to conclude a $350 billion investment deal with the U.S., with the two sides still disagreeing on the method and destination of that investment. Negotiations with the U.S. under Trump are — and will continue to be — replete with multifaceted twists and turns, and the Korean government must have its own bag of innovative counteroffers and strategies for success.

In that vein, the APEC summit will invariably be a crucial litmus test for Korea to assert itself as a major partner and negotiator.

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