ASSESSMENTS

Japan and South Korea Brace for a Prolonged Trade Battle

Nov 25, 2019 | 09:15 GMT

South Koreans participate in a rally to denounce Japan's new trade restrictions and Japanese Prime Minister Shinzo Abe on Aug. 24, 2019, in Seoul. The bilateral relationship between Japan and South Korea has worsened recently amid escalating trade tensions.

Protesters rally against Japan's new trade restrictions in Seoul on Aug. 24, 2019. Tokyo's move to limit key chemical exports to tech companies has sparked ongoing boycotts of Japanese products in South Korea.

(CHUNG SUNG-JUN/Getty Images)

Highlights

  • The prospects for a clean resolution to the South Korea-Japan trade war remain slim, as backing down would have political repercussions for both countries' leaders. 
  • Without a formal end to the dispute, boycotts will continue to hurt sales of Japanese products in South Korea, though the overall economic impact to Japan will remain relatively small. 
  • South Korean semiconductor companies have so far been able to cushion the blow of Japanese export restrictions, but the continued shortage of crucial chemical shipments could further cut into their profits in 2020.

Between the slings and arrows of China's global trade war with the United States, a separate battle has been brewing between the Asia-Pacific's next two largest economies: Japan and South Korea. But unlike the economic issues underpinning Beijing's fight with Washington, Tokyo and Seoul's dispute is fundamentally rooted in bitter grievances that date back to Japan's occupation of South Korea during World War II. The politically delicate nature of the dispute will continue to complicate both countries' ability -- and desire -- to bring a definitive end to their spat. But between the two, South Korea's more export-reliant economy stands more to lose from souring trade relations with Japan....

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